Ultra-short bond funds and money market funds: Know the difference (2024)

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The fund's prospectus contains its investment objectives, risks, charges, expenses and other important information and should be read and considered carefully before investing. For a current prospectus, visit www.etrade.com/mutualfunds or visit the Exchange-Traded Funds Center at www.etrade.com/etf.

Investing in securities involves risk, including the possible loss of principal.

You could lose money by investing in a money market mutual fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. Depending upon the type of money market fund in which you invest, a fee may be imposed upon the sale of your shares as determined by the fund. Any redemption or liquidity fees will be described in your money market fund's prospectus. An investment in any money market mutual fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.

ETFs are subject to risks similar to those of other diversified investments. Investing in ETFs involves risk, including the possible loss of principal. Although ETFs are designed to provide investment results that generally correspond to the performance of their respective underlying indices, they may not be able to exactly replicate the performance of the indices because of expenses and other factors. ETF shares cannot be redeemed directly from the ETF. ETFs are required to distribute portfolio gains to shareholders at year-end, which may be generated by portfolio rebalancing or the need to meet diversification requirements. ETF trading may also have tax consequences. An ETF’s expense ratio is the annual operating expense charged to investors.

Bonds are subject to interest rate risk. When interest rates rise, bond prices fall; generally the longer a bond's maturity, the more sensitive it is to this risk. Bonds may also be subject to call risk, which is the risk that the issuer will redeem the debt at its option, fully or partially, before the scheduled maturity date. The market value of debt instruments may fluctuate, and proceeds from sales prior to maturity may be more or less than the amount originally invested or the maturity value due to changes in market conditions or changes in the credit quality of the issuer. Bonds are subject to the credit risk of the issuer. This is the risk that the issuer might be unable to make interest and/or principal payments on a timely basis. Bonds are also subject to reinvestment risk, which is the risk that principal and/or interest payments from a given investment may be reinvested at a lower interest rate.

Bonds sold by issuers with lower credit ratings may offer higher yields than bonds issued by higher-rated or "investment-grade" issuers, but are usually associated with higher risks. High-yield bonds generally have a greater risk of default, which increases the risk that an issuer will be unable to pay interest and return principal on the bond. In addition, high-yield bonds tend to have higher interest rate risk and liquidity risk, particularly in volatile market conditions, which makes it more difficult to trade them. Before investing in high-yield bonds, you should carefully consider and understand the associated risks.

Fluctuations in interest rates may cause investment prices to fluctuate. For example, when interest rates rise, yields on existing bonds become less attractive, causing their market values to decline.

High-yield, non-investment-grade bonds involve higher risk than those that invest in investment-grade bonds. Adverse conditions may affect the issuer’s ability to pay interest and principal on these securities and, as a result, they may have a higher probability of default.

Debt obligations are subject to credit risk, as they can be downgraded by rating agencies, go into default, or be affected by management action or by legislation or other government action that may reduce the issuers' ability to pay principal and interest when due.

Investments in mortgage and/or asset-backed securities involve risks, including the risk of prepayment, which may affect the overall return of the investment. Only select deposit products are guaranteed by the Federal Deposit Insurance Corporation, and the credit quality of a particular security or group of securities does not ensure the stability or safety of the overall portfolio.

The material provided by Morgan Stanley Smith Barney LLC, Morgan Stanley or any of theiraffiliates, or by a third party not affiliated with Morgan Stanley is for educational purposes only and is not an individualized recommendation. This information neither is, nor should be construed as, an offer or a solicitation of an offer, or a recommendation, to buy, sell, or hold any security, financial product, or instrument discussed herein, or to open a particular account or to engage in any specific investment strategy.

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