A
mutual fund that
invests predominantly or exclusively in
corporate bonds (that is, bonds issued by private sector companies) with maturities of less than a year or so. These funds are considered beneficial when
interest rates are falling (and therefore when bond
prices are rising) because the funds
sell bonds, creating
gains from the higher prices. Corporate bond short-term funds generally carry lower
risks than mutual funds investing primarily in stocks, but the levels of risk vary according to the
credit ratings of the companies whose bonds are represented in the fund.