While our short-term fixed income funds strive to generate income, there are some important distinctions. The table below compares some of the key differences between our short-term fixed income funds.
Short-Term Fixed Income Key Differences
|Ultra Short-Term Bond Fund
|Short-Term Bond Fund
Investors looking for potential…
|Unlimited trading frequency|
|Available as brokerage sweep|
|Asset class||Money market||Bond||Bond|
|Seeks…||Preservation of capital; liquidity; and, consistent with these, the highest possible current income.||Highest level of income commensurate with liquidity and minimal fluctuations in principal value.||Highest level of income commensurate with liquidity and minimal fluctuations in principal value.|
|Typical holding maturities||Less than 13 months||Approximately 1.5 years||Approximately 3 years|
|Duration range||0.1 to 0.2 years||0.75 to 1.0 years||1.5 to 2.3 years|
|Credit quality||Must be rated between AAA and AA||Investment Grade||Investment Grade|
|Net asset value (NAV)||Stable at $1*||Fluctuates||Fluctuates|
Invests in, but not limited to,
|U.S. Treasury and agency issues|
|Certificates of deposit|
|Emerging markets debt|
Comparative fund risks
|Interest rate risk||Lower||Low||Moderate|
*An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a money market fund.
1As of fiscal year-end 5/31/2014.
2Note about the Ultra Short-Term Bond Fund's expense ratio: The fund's expense ratio as of its fiscal year ended 05/31/2014 was 0.49%. To protect the interests of shareholders, T. Rowe Price will waive its fees and/or bear any expenses that would cause the fund's expense ratio to exceed 0.35%. This contractual expense limitation expires on 9/30/2015.
3Funds are placed in general risk/return categories based on their past performance or, for newer funds, the performance of the types of securities in which they invest. There is no assurance past trends will continue.
Duration: The average time (expressed in years) needed for an investor to receive the present value of the future cash flows on a fixed income investment. It is used to measure a bond or bond fund's sensitivity to interest rate changes. For example, a fund with a duration of six years would fall about 6% in price in response to a one-percentage-point rise in interest rates, and vice versa.