Are short term bonds safer than long term bonds?

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If you had some funds to invest for a reasonable return without bearing any significant risk, would you invest in short term or long term bonds? Are short term or long term safer investments?

2 Answers

score 0 · Answer 1 · 2012-12-02T21:36:39+00:00

Long term bonds tend to be more risky due to the higher uncertainty that the longer maturity brings. Apart from that, money is more attractive now rather than in 20 years. For the above two reasons, the return for the long term bonds is higher than the return for the short term bonds.

score 0 · Answer 2 · 2013-05-07T23:17:52+00:00

You can not compare them like that unless they are from the same issuer and they are issued under the same legal system. All things being equal, a short term bond will have lower risk because the risk of default increases as the maturity is further in the future because of the uncertainty that the longer maturity brings.

However, you can have a less risky long term investment issued by country A for example when compared with a short term bond issued by country B.