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What Are the Best Short-Term, High-Quality Bond Funds?

Very short-term, high-quality bond funds are going to pay slightly higher rates of interest than money market funds and CDs but less than longer-term bond funds. They carry very little risk of default and have minimal volatility. Sometimes referred to as near-cash, these bond funds are often the best investments for money that you may need to tap within one to three years.

Fidelity Spartan Short-Term Treasury Bond Index Fund (FSBIX)

Contact: 800-544-6666; Fidelity

Type of fund: Actively run mutual fund

Types of bonds: Short-term government bonds

Average maturity: 2.8 years

Expense ratio: 0.20 percent

Minimum investment: $10,000

This is a convenient place to park your short-term money, especially if you’re building a portfolio at Fidelity.

State Farm Interim (SFITX)

Contact: 800-447-4930; State Farm

Type of fund: Actively run mutual fund

Types of bonds: Short-term government

Average maturity: 2.8 years

Expense ratio: 0.16 percent

Minimum investment: $250

Generally, insurance company mutual funds stink; this is a notable exception! The low minimum investment is nice.

Vanguard Short-Term Investment-Grade (VFSTX)

Contact: 800-662-7447; Vanguard

Type of fund: Actively run mutual fund

Types of bonds: Short-term government and high-grade corporate

Average maturity: 2.7 years

Expense ratio: 0.22 percent

Minimum investment: $3,000

If you have $50,000 to invest in this fund, you are eligible for the Admiral Shares class (ticker VFSUX). You’ll be investing in the same fund as VFSTX, but the expense ratio drops to 0.11 percent.

Vanguard Short-Term Bond ETF (BSV)

Contact: 800-662-7447; Vanguard

Type of fund: Index exchange-traded fund

Types of bonds: Short-term government and high-grade corporate

Average maturity: 2.8 years

Expense ratio: 0.11 percent

Minimum investment: None

This fund is also available in mutual-fund form under the tickers VBISX (minimum investment $3,000, with an expense ratio of 0.22 percent) and VBIRX (minimum investment $10,000, with the same expense ratio as the ETF, 0.11 percent).

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