Locate a bond fund's duration in the bond fund's online profile under Portfolio Data. Locate a bond ETF's duration from either the Snapshot page or Key Statistics, where the duration of the specific ETF can be compared to the asset class median duration. Locate a bond's duration under each bond's Bond Details page.
Compare the duration of two bonds. As you review potential bond investments, you can easily compare duration and other characteristics between two bonds using this tool. In general, the bond market is volatile, and fixed income securities carry interest rate risk.
As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities. Fixed income securities also carry inflation risk, liquidity risk, call risk, and credit and default risks for both issuers and counterparties.
Any fixed income security sold or redeemed prior to maturity may be subject to loss. A bond ladder, depending on the types and amount of securities within it, may not ensure adequate diversification of your investment portfolio. While diversification does not ensure a profit or guarantee against loss, a lack of diversification may result in heightened volatility of your portfolio value. You must perform your own evaluation as to whether a bond ladder and the securities held within it are consistent with your investment objectives, risk tolerance, and financial circumstances.
To learn more about diversification and its effects on your portfolio, contact a representative. Skip to Main Content. Search fidelity. Investment Products. Why Fidelity. Home » Research » Learning Center ». Print Email Email. Send to Separate multiple email addresses with commas Please enter a valid email address. Duration will be higher the lower its yield. Duration will also be higher the longer its maturity.
These are hypothetical examples for illustrative purposes only. They are not intended to reflect the actual performance of any security. As the yield on a bond changes so too does its duration. At the end of that time period the bond's principal is repaid to the owner of the bond and interest payments cease.
A bond's duration, on the other hand, is a more abstract concept often used to measure interest-rate sensitivity. Bond investors often pay attention to interest-rate movements because any movement up or down in rates has the opposite effect for bond prices. That's because an increase in interest rates makes an existing bond and its now below-market interest rate worth less while a drop in rates increases the bond's value.
Different Types of Duration Among the most widely used methods of measuring duration are Macaulay, modified, and effective. Macaulay duration, which is named after Frederick Macaulay, who developed it in , provides a weighted average of the time to each interest coupon and principal payment of a bond.
Modified duration is a slightly more involved calculation that takes into account the effects of interest-rate movements. Effective duration is another, still-more complicated measure used to assess interest-rate sensitivity when callable securities those that may be paid off before maturity are involved.
Macaulay Duration From our definition above, we can make the following observations: Duration cannot exceed the number of periods to maturity of the bond. The Duration of a zero-coupon bond is the number of years until maturity. You can also use the following app to see duration decrease when maturity increases. Modified Duration Calculation.
Credits and Collaboration Click the following links to see the code , line-by-line contributions to this presentation , and all the collaborators who have contributed to 5-Minute Finance via GitHub. Learn more about how to contribute here. Also in Fixed Income and Other Debt 1.
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