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Short-term corporate bond funds
Short-term corporate bond funds | Daxiao Productions/Shutterstock.com

Short-term corporate bond funds

How they're valued: Short-term corporate bond funds invest in bonds that corporations issue. Short-term bonds have an average maturity of one to five years.

Risks: As is the case with other bond funds, short-term corporate bond funds are not FDIC-insured. Investment-grade short-term bond funds can reward investors with higher returns than munis or Treasuries. But along with the greater reward comes greater risk. There is always the chance that companies will have their credit rating downgraded or run into financial trouble and default on the bonds.

Liquidity: You can buy or sell your fund shares every business day. In addition, you usually can reinvest income dividends and make additional investments at any time. However, it's possible to suffer capital losses.

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