Cash feels safe until the yield disappears. With the Fed eyeing more rate cuts in 2026, money market yields will fall in lockstep, in real time, leaving cash parked investors stuck reinvesting at lower and lower rates for years to come. That's reinvestment risk, and it's the quiet threat nobody budgets for. Ultrashort bond funds offer a way around it. By adding a sliver of duration, under a year typically, these funds can lock in today's income while even picking up price gains as rates fall, all without the stomach churning swings of long term bonds. The category is a grab bag though, ranging from plain three month Treasury bill funds to riskier floating rate corporate bond funds, so not every ultrashort fund behaves the same. History backs the strategy in falling rate environments: ultrashort bond funds have outpaced money market funds in most periods since rates started declining.

Finsum: Staying in cash through a rate cutting cycle guarantees you'll reinvest at worse and worse yields, and a modest step into ultrashort duration is one of the simplest ways to lock in income.