These 31 funds are the cheapest for short-term stakes in short-term bonds.
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Do you have idle cash in your brokerage account? Chances are it’s not earning much. Consider switching to a brief investment in an exchange-traded fund that owns short-term bonds.
The scorecard below shows the cheapest ETFs for a position held for three months. A good deal lets you in and out of fixed-income securities at a cost of $4 or less per $10,000 invested.
| 3-month Holding Cost* | |||
| Liquidity Score | |||
| Ticker | Exchange-traded fund | ||
| Diversified and corporate | |||
| CSJ | iShares 1-3 Year Credit Bond | $2.05 | A |
| BSV | Vanguard Short-Term Bond | 3.07 | A |
| ISTB | iShares Core 1-5 Year USD Bond | 3.42 | A |
| SLQD | iShares 0-5 Year Invmt Grade Corp Bd | 4.26 | B |
| SPSB | SPDR Portfolio Short Term Corp Bd | 5.07 | A |
| IBDK | iShares iBonds Dec 2019 Term Corp | 6.40 | B |
| FLOT | iShares Floating Rate Bond | 6.72 | A |
| PULS | PGIM Ultra Short Bond | 6.83 | B |
| FLRN | SPDR Blmbg Barclays Inv Grd Flt Rt | 7.02 | A |
| IBDL | iShares iBonds Dec 2020 Term Corp | 7.32 | B |
| BSCI | PowerShares BulletShrs 2018 Corp Bd | 7.32 | B |
| JPST | JPMorgan Ultra-Short Income | 8.09 | A |
| NEAR | iShares Short Maturity Bond | 8.24 | A |
| GSY | PowerShares Ultra Short Duration | 8.35 | A |
| IBDH | iShares iBonds Dec 2018 Term Corp | 8.38 | B |
| FLTR | VanEck Vectors Investment Grd Fl Rt | 8.54 | B |
| BSCK | PowerShares BulletShrs 2020 Corp Bd | 8.55 | B |
| BSCJ | PowerShares BulletShrs 2019 Corp Bd | 8.55 | B |
| MINT | Pimco Enhanced Short Maturity Active | 9.87 | A |
| Government | |||
| VGSH | Vanguard Short-Term Treasury | 3.89 | A |
| SCHO | Schwab Short-Term US Treasury | 4.07 | A |
| BIL | SPDR Blmbg Barclays 1-3 Mth T-Bill | 4.54 | A+ |
| ICSH | iShares Ultra Short-Term Bond | 4.55 | B |
| SHV | iShares Short Treasury Bond | 4.70 | A+ |
| SHY | iShares 1-3 Year Treasury Bond | 5.02 | A+ |
| GBIL | Goldman Sachs TreasuryAccess 0-1 Year | 5.31 | A |
| CLTL | PowerShares Treasury Collateral | 5.85 | B |
| SPTS | SPDR Portfolio Short Term Treasury | 6.61 | B |
| TFLO | iShares Treasury Floating Rate Bond | 7.32 | B |
| USFR | WisdomTree Bloomberg Floating Rt Trs | 7.83 | B |
*Cost of a $10,000 position held for three months. Reflects bid/ask spread, expense ratio and cost offset from securities lending.
Data sources: Morningstar, Bloomberg, fund distributors
There’s some risk in short-term bonds. If rates rise further, they will get dinged. But it’s just as likely that rates will go down, giving you a modest capital gain. Either way, you pocket the interest, which is going to be just over 2% a year for most of these funds.
Suppose you have $10,000 on the sidelines. In a short-term bond fund it could, over three months, bring in $60 less the cost shown in the table, for a net of $55 or so. Left in your brokerage sweep account, it might earn only $5.
Besides rate risk, some bond funds have credit risk. It’s negligible for the government-bond funds in the second half of the table, but something to think about for the funds that own corporate bonds.
Morningstar is a good source of further detail on bond funds. Two attributes to pay particular attention to: the average maturity of the bonds in the portfolio (less than three years for all of the funds here) and the average credit quality.
For cost comparisons on ten-year holding periods, see Best ETFs for Investors: Short-Term Bonds. For links to rankings of ETFs on short-term holding periods in other categories (medium-term bonds, foreign stocks, etc.), go to Best ETFs for Trading.