Choose Duration for the Job
Choose short, intermediate, or longer duration based on horizon and acceptable rate sensitivity.
The setup The client wants more yield, but tuition starts in 30 months. Duration makes the tradeoff visible. A long-duration fund can lose value right when cash is needed. The duration principle Rate sensitivity follows duration Use duration as a first-pass estimate of how much price changes when yields move. Shortcut Choose the fund with the higher yield. Duration is chosen for the liability, not just the forecast. Longer duration is not better or worse by itself. It is better or worse for a specific horizon. 01 Horizon 02 Shock 03 Reinvest 04 Now you try
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