How to Invest In A US Government Short-term Fund

For United States (US) government short-term bond funds, the average maturity is 1 to 5 years. A minimum of 80 percent of a US government short-term bond fund portfolio consists of US government securities. In 2005, $1.357 trillion was invested in bond funds. US Government short-term bond funds can put you on the fast track to the yields you desire.

Instructions

Difficulty: Moderately Easy

Things You’ll Need:

• Funds for investing
• Internet access

Instructions

1. Determine your investment objectives. Decide your reasons for investing and realize that these reasons may change over time.
2. Recognize that US government bond funds are considered relatively safe because the securities are of high credit quality. US government bond funds typically invest in Treasury bills, notes and bonds, mortgage-backed securities from government lending entities, and other asset-related securities.
3. Consider the level of risk with which you feel comfortable and remember that the Federal Deposit Insurance Corporation (FDIC) does not insure bond funds. Since all securities fluctuate in value, it is possible to lose money investing in short-term government bond funds.
4. Realize that the highest level of risk associated with US government bond funds is due to inflation and changes in interest rates. Assess the level of risk with which you are comfortable.
5. Research US short-term bond funds on an investment website, such as Morningstar, a link to which can be found below in the Resources section.
6. Determine the amount you'd like to invest in US short-term bond funds. Make sure the amount meets the minimum investment requirements of the fund you are considering.
7. Contact your broker or financial advisor to purchase fund shares. Alternatively, you may choose to invest by contacting the bond fund directly.
8. Request a prospectus for each fund that suits your investment objectives. Review each one to learn the fund's objectives, charges and expenses, as well as to uncover the risks involved.

Tips & Warnings

• Keep in mind that a certain amount of risk is necessary when investing in US short-term bond funds. However, the level of risk you take correlates with the potential for financial gain. The higher the level of risk, the greater the potential for earnings.
• Government bond funds can help to offset the credit risk present in other areas of your investment portfolio.
• Enlisting the help of a professional financial advisor can save time and frustration, enabling you to obtain expert advice on your investment objectives. Many mutual fund firms provide referrals to financial advisors.