What do short-term bonds generally represent in their maturity timeline?

Short-term bonds are typically defined based on their maturity timeline, with a common benchmark being those that have maturities ranging from one year to three years. This classification is important for investors because it indicates the investment's time horizon and the associated risks, particularly in terms of interest rate changes.

Maturities of zero to seven years encompass both short-term and some intermediate-term bonds. However, when focusing solely on short-term bonds, the most widely accepted definition places them at a maximum maturity of three years. This means that while the range of zero to seven years includes shorter bonds, it does also extend into the area of intermediate bonds. Therefore, the most accurate characterization of short-term bonds is the narrower range of one to three years.

Understanding the maturity of bonds is crucial for managing investment risk, helping investors align their portfolios with their financial goals and market conditions.