Portfolio Risk & Return

Duration

A bond’s or bond fund’s sensitivity to interest rates, expressed in years. The rule of thumb: for each 1 percentage point rise in interest rates, a bond’s market value falls by roughly its duration in percent — so a fund with a duration of 6 would lose about 6%, and one with a duration of 17 about 17%. Falling rates work the same way in reverse. Long-term government bond funds have long durations, which is why they can rise sharply when rates are cut and fall hard when rates climb, as they did in 2022; short-term bond funds have short durations and move far less. Duration is the main reason a safe bond can still lose money.

Educational information, not investment advice. See it applied across the screener →