Usually when I talk about an investment term I tell you what it is. But that one is pretty complex, so I’m mostly going to tell you what it isn’t.
If you’re researching bond funds, you’ll run across the term ‘duration’ and it gives a number of years. There is a tendency to think “Oh, that’s the average length of the bonds in their portfolio”. But that’s not correct. Duration is actually a measure of the volatility of a bond portfolio. That it has the term duration and is expressed in years, is unfortunate. Only in a bond fund that contains only zero coupon bonds would duration tell you the average years to maturity. The average years of their holdings is always more than the duration.
Duration is mostly useful comparing different bond funds. If one has a duration of 5 years, and another of 7 years, the one that’s 7 years will be more volatile with changes in interest rates.
If you’re interested in really understanding what it means, you can take a look at Investopedia. But I warn you, expect your brain to hurt.