The Best Short-Term and Ultrashort Bond Funds and ETFs to Buy

When financial markets look uncertain, short-term and ultrashort bond funds can provide a place for investors to park their money as they wait for market improvements. Morningstar fund reporter Gabe Alpert explains, “Short-term bond funds can be safer holdings for fixed-income investors worried about rising interest rates.”

Morningstar portfolio strategist Amy Arnott also sees value in these investments. “I’d argue that short-term bonds are one of the key asset classes that most investors should own,” she says.

What Are Short-Term and Ultrashort Bond Funds?

Short-term bond portfolios invest primarily in corporate and other investment-grade US fixed-income issues and typically have durations of 1.0 to 3.5 years, while ultrashort portfolios will invest in issues that have durations of less than one year. This group also includes short-government portfolios that have at least 90% of their bond holdings in bonds backed by the US government or by government-linked agencies. Short-term bond portfolios are attractive to fairly conservative investors because they are less sensitive to interest rates than portfolios with longer durations. Short term is defined as 25% to 75% of the 3.0-year average effective duration of the Morningstar Core Bond Index.

The 12 Best Short-Term and Ultrashort Bond Funds and ETFs to Buy in 2026

To find the best short-term and ultrashort bond funds and ETFs to buy, we screened for the lowest-cost primary share classes earning a Morningstar Medalist Rating of Gold with 100% analyst coverage. All the funds and ETFs on the list fall into the short-term, ultrashort, or short-government bond Morningstar Categories and have at least $100 million in assets. All data is as of Jan. 20.

1. American Funds Tax-Exempt Preservation Portfolio TYEFX
2. Baird Short-Term Bond Fund BSBIX
3. Baird Ultra Short Bond Fund BUBIX
4. JPMorgan Limited Duration Bond ETF JPLD
5. PGIM Short Duration Multi-Sector Bond ETF PSDM
6. PIMCO Enhanced Short Maturity Active Exchange-Traded Fund MINT
7. PIMCO Enhanced Short Maturity Active ESG Exchange-Traded Fund EMNT
8. PIMCO Short Asset Investment Fund PAIDX
9. Schwab Short-Term US Treasury ETF SCHO
10. State Street SPDR Portfolio Short Term Treasury ETF SPTS
11. Vanguard Short-Term Corporate Bond Index Fund VSTBX
12. Vanguard Short-Term Treasury Index Fund VGSH

Because the screen was created with the lowest-cost share class for each fund, some may be listed with share classes that are not accessible to individual investors outside of retirement plans, or they may be aimed at institutional investors and require large minimum investments. The individual investor versions of those funds may carry higher fees, reducing returns to shareholders. Medalist Ratings may differ among the share classes of a fund.

Morningstar expects the highly rated short-term and ultrashort bond funds on this list to outperform their peers over a full market cycle. But even though all the funds on our list fall into the same category, they may practice different strategies and therefore behave differently from each other. Investors need to do some homework to understand exactly what a particular fund invests in before buying.

How to Find More of the Best Funds and ETFs to Buy for the Long Term

Given their high Morningstar Medalist Ratings, we expect the top-rated funds on our list to outperform over a full market cycle. That being said, investors may want to expand their search beyond this list, using parameters that matter to them. Here are more ways to find more ETFs and mutual funds:

• Use the Morningstar Investor screener to create your own list of funds to investigate further.
• Explore Morningstar Medalist funds on our Best Investments page.
• Read our latest fund insights and analysis on Morningstar.com.