Not long ago, short-term bond funds were thought to be for cowards. They were boring, unimaginative and safe. Now some savvy investors are shopping for them precisely because they re considered boring, unimaginative and safe. Last year investors plowed more than $50 billion in new money into short-term bond funds, which typically invest in corporate debt maturing in less than five years. That s more than 10 times the amount investors put into the funds in 2007, according to Morningstar.

The surge in the popularity of short-term bond funds is coming at the expense of a traditional investment safe haven: money-market funds. The average money-market fund is yielding a paltry 0.02 percent, or $20 a year for every $10,000 invested, according to research firm iMoneyNet. People are desperate to find a safe investment that pays interest, says Bill Larkin, a fixed-income portfolio manager at Cabot Money Management in Salem, Mass. Short-term bond funds do indeed offer higher yields, on average. Even though they are riskier than money-market funds, with interest rates flat for now and uncertainty in the stock market, some experts say short-term bond funds offer stability and steady income. It s a good place to hide out, says Mitch Stapley, chief fixed-income officer at Fifth Third Asset Management, which has $13 billion in assets.

Some analysts recommend T. Rowe Price Short-Term Bond, which yields 3.0 percent and was one of the few short-term bond funds that didn t lose money in 2008. Larkin prefers an exchange-traded fund: iShares Barclays 1 3 Year Credit Bond. The $5.8 billion ETF, which can be traded like a stock, holds more than 600 corporate bonds and yields 3.6 percent with just $20 in expenses for every $10,000 invested.

Of course, the outlook for short-term bond funds and ETFs isn t all rosy. Rising interest rates can depress the prices of all bonds, and a quick move up in rates could effectively erase the yield of short-term bonds, says Ken Volpert, head of the taxable-bond group at Vanguard. Volpert says an alternative is intermediate-term bond funds, which have higher yields and could be less sensitive to quick interest-rate hikes.

Correction: The article originally misstated the average yield of a money-market fund. It's 0.02 percent, not 0.44 percent.