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6. How does the risk of short-term funds differ from the risk of long-term funds?

6. How does the risk of short-term funds differ from the risk of long-term funds?
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Short term funds are generally for less than a year and long term funds are for longer tenure. One of the most important risk for long term funds is the deafult and liquidity risk.Short Term funds are highly liquid and there is generally no default risk. Any market, government or company news can have impact on long term funds making it more risky and the risk of default can increase. Hence the long term funds are diversified and the risk is market based or it is systematic. Generally bond funds have more interest rate risk.

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