6 Best Mutual Funds for Rising Interest Rates
The Fed has held rates artificially low for years. Investors need to prepare for their inevitable rise.
- (opens in new tab)
- (opens in new tab)
- (opens in new tab)
- Newsletter sign up Newsletter

The picks below are part of Kiplinger’s Personal Finance’s annual Best List, a roundup of the best values in all the areas we cover — from funds, stocks and ETFs to credit cards and bank accounts to cars, college, kid stuff, phone plans, travel and health. Discover all our Best List picks here.
Kiplinger's Best List, 2016
- Best Mutual Funds You Can Invest in for $125 or Less
- Best Mutual Funds for Dividend Investors
- Best Mutual Funds for Investing in Value Stocks
- Best Stocks for Yield at a Reasonable Price
- Best Online Brokers
- Best Rewards Credit Cards
- Best Deals in Online Banking
- Best Personal-Finance Websites, Apps and Software
- Best New Car Values
- Best Shopping Websites and Apps
- Best Ways to Save Time and Money on Travel
- Best Package Tours for Your Money
- Best Travel Discounts for Seniors
- Best Phone Plans for Every Type of User
- Best Websites and Tools to Save on Your Health
Vanguard Short-Term Investment-Grade Fund (VFSTX (opens in new tab), yield 1.5%), a member of the Kiplinger 25, should weather a rate rise well. Its 2.6-year average duration (a measure of interest-rate sensitivity) implies that the fund’s price would fall by 2.6% if rates were to rise by one percentage point. Vanguard Short-Term Bond ETF (BSY (opens in new tab), $81, 1.2%) is an exchange-traded fund that tracks an index of short-term bonds and charges just 0.09% per year for fees. Its average duration is 2.8 years.
Buy a floating-rate bank loan fund
Fidelity Floating Rate High Income (FFRHX (opens in new tab), 3.8%) and PowerShares Senior Loan Portfolio (BKLN, $23, 4.6%), a member of the Kiplinger ETF 20, hold securities with “floating” interest rates. As interest rates rise, so will rates on the loans (see Get a Boost From a Floating-Rate Fund for more on these kinds of funds).

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Reach for yield
Corporate junk bonds are typically less susceptible to rises in interest rates than high-quality bonds. A great choice is Vanguard High Yield Corporate (VWEHX (opens in new tab), 4.9%). Pimco Income (PONDX (opens in new tab), 3.7%), also a member of the Kip 25, is the best choice among funds that invest in multiple bond categories.
Nellie joined Kiplinger in August 2011 after a seven-year stint in Hong Kong. There, she worked for the Wall Street Journal Asia, where as lifestyle editor, she launched and edited Scene Asia, an online guide to food, wine, entertainment and the arts in Asia. Prior to that, she was an editor at Weekend Journal, the Friday lifestyle section of the Wall Street Journal Asia. Kiplinger isn't Nellie's first foray into personal finance: She has also worked at SmartMoney (rising from fact-checker to senior writer), and she was a senior editor at Money.
-
-
Dollar Tree Has Stopped Selling This One Staple
Shopping Dollar Tree stores are taking eggs off their shelves due to high prices.
By Quincy Williamson • Published
-
Ford and Honda Recall Nearly 2 Million Vehicles. Is Yours Affected?
Ford and Honda have recalled models including the popular F-150, CR-V and Accord for issues with brakes, wipers and more.
By Ben Demers • Published
-
Best Consumer Discretionary Stocks to Buy Now
Consumer discretionary stocks have been challenging places to invest in, but these picks could overcome several sector headwinds.
By Will Ashworth • Published
-
Best Communication Services Stocks to Buy Now
Despite continued macro headwinds, pockets of opportunity remain among the best communication services stocks.
By Tom Taulli • Published
-
Best Mid-Cap Stocks to Buy Now
The best mid-cap stocks are the market's so-called "sweet spot," offering up an ideal combination of financial stability and growth potential.
By Will Ashworth • Published
-
The Best ETFs to Buy Now
Finding the best ETFs to buy in a high-inflation environment can seem like a tall task, but these five picks are a good place to start.
By Charles Lewis Sizemore, CFA • Published
-
The 9 Best Consumer Staples Stocks to Buy
In an uncertain market, the best consumer staples stocks provide consistency and stability to portfolios.
By Jeff Reeves • Published
-
The 9 Best Tech Stocks to Buy Now
The tide could be turning for the beaten-down technology sector, which makes these top tech stocks worth a closer look.
By Tom Taulli • Published
-
The 9 Best Utility Stocks to Buy Now
Income investors like utility stocks for their stability and generous dividends. Here are nine to watch in an uncertain market.
By Jeff Reeves • Published
-
Kiplinger's Weekly Earnings Calendar (March 20-24)
stocks Check out our earnings calendar for the upcoming week, as well as our previews of the more noteworthy reports.
By Karee Venema • Last updated