Duration
Educational only, not financial advice.
Duration measures how sensitive a bond's (or bond fund's) price is to changes in interest rates. It's expressed in years, but it's really a sensitivity measure, not just time to maturity.
Why it matters
- Longer-duration bonds see larger price swings when interest rates change.
- Short-duration bonds are more stable but generally offer lower yields.
- Duration helps investors understand how much interest-rate risk a bond or bond fund carries.
Simple example
- A bond fund with a duration of 7 years would be expected to fall roughly 7% in price if interest rates rose by 1 percentage point (all else equal).
- A short-term bond fund with a duration of 2 years would be expected to fall only about 2% under the same rate increase.
How beginners use this
Longer duration usually means larger price swings when rates move. Match bond ETF duration to how soon you may need the money.
Related terms
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Sources
Reviewed by Greg Parsons. Links checked October 14, 2026. Educational only, not financial advice.