Time Horizon

What is Time Horizon?

It is the time that an investor expects to hold an investment before requiring access to the money. It's a very important factor in determining investment strategies, risk tolerance, and asset allocation.

Key Points on Time Horizon

What does the time horizon mean?

It's the time period that an investor intends to hold an investment, which could be as short as a few days or as long as several years.

Types of Time Horizons:

Short-Term (Within 1-3 years):

• Investments allocated for short-term goals.

• Investors tend to choose safer options with more liquidity in an attempt to minimize risk.

Medium-Term (3-10 years):

• It is very common to have a mix of both stocks and bonds in order to balance growth with risk.

Long-Term (10+ years):

• Investment in growth in the long run, like retirement savings.

• Investors can afford to take more risks since they have time to recover from market ups and downs.

Why is Time Horizon important?

• Risk Tolerance:
  In principle, the longer the time horizon, the more risk an investor can take because there is enough time to recover from market volatility.

• Investment Strategy:
  The time horizon dictates what kind of investments make sense. A short-term investor may be interested in stability, whereas a long-term investor can aim at higher growth opportunities.