What is a Time Horizon in Investing? (& How to Find Yours)
learn
basic

What is a Time Horizon in Investing? (& How to Find Yours)

basic

3 min read

img

How many years do you have until you hope to retire? Until you want to buy a house? Send your kid off to college? Questions like these are one of the most important in investing. Answering them involves assessing your time horizon.

Let's dig into what a time horizon is in investing, the different types you may have, and why it's important to know yours.

Time horizons in investing, explained

Sometimes, we invest for fun. Other times, we want capital gains to help us achieve a specific goal. Typically, we can associate some time frame to our goals.

For example, you may want to buy a house in 5 years, send your child off to college in 15 years, and retire in 35 years.

All of these are time horizons, or periods of time you expect to hold your money in investments until you're ready to use the cash (aka be liquid).

Why you should know your time horizon for every investment

Every investment you make—even the fun ones—should have an investment time horizon attached.

This is because different investments carry different risks. For example, putting your cash into a high-yield savings account keeps you liquid indefinitely. It also minimizes your returns, so sometimes you want to add money to broad market indexes or specific funds/stocks to see your cash grow more quickly.

However, the stock market is volatile, and it can take time to recover after suffering a crash. We saw this happen in the US stock market and worldwide starting around Feb. 20, 2020. The crash lasted nearly two months.

The 3 broad categories of time horizons

Typically, you can break your goals—and therefore your investment time horizons—into three categories:

  • Short-term (up to 5 years)

  • Medium-term (5–15 years)

  • Long-term (15–40+ years)

Your goals won't be the same as another investor's. However, let's give some examples to show you how you might apply time horizons to your own life.

Short-term goals might include buying a new computer, funding a honeymoon, or paying off your student loans. You want this money liquid, so you may want to use capital gains you've already pocketed or savings account funds.

Take a slightly longer perspective for medium-term goals. For example, you may want to pay for a down payment on a house and prepare to take on a mortgage. For medium-term goals like this, you can invest a bit, but be more conservative. The US stock market took 13 months to recover from a major securities selloff in 2015.

For long-term goals like retirement, you've got plenty of time to readjust your portfolio. You can gradually reduce risk and transition from stocks to bonds to cash over time.


Never miss a thing!

news and markets updates

* Terms apply

Raseed Invest Limited © 2021 - All Rights Reserved.

Raseed Invest Limited (“Raseed”) registered in the Dubai International Financial Centre (“DIFC”) and is regulated by the Dubai Financial Services Authority (“DFSA”) to conduct financial services “Arranging Deals in Investments” with a 'Retail' endorsement. Raseed does not provide any trading or investment advice and shall not be responsible for any loss arising from any investment based on any general information provided by Raseed or as may be available on Raseed’s website and other web-based services (collectively, the “Website Services). Raseed does not warrant that the information is accurate, reliable or complete or that the supply will be without interruptions. Any third party information provided through does not reflect the views of Raseed.

The content of the Website Services provided by Raseed is only intended to provide you with general information and is neither an offer to sell nor a solicitation of an offer to purchase any security and may not be relied upon for investment purposes. Any commentaries, articles, daily news items, public and/or private chat publications, stock analysis and/or other information contained in the Website Services should not be considered investment advice.

Raseed shall not be liable for any delay, inaccuracy, error or omission of any kind in the information provided by Raseed and/or any third party information provider or for any resulting loss or damage you may suffer as a result of or in connection with the information supplied by Raseed and/or any third party information provider. In addition, Raseed shall have no liability for any losses arising from unauthorized access to information or any other misuse of information.

Any opinions, news, research, analysis, prices, or other information contained on our Website Services or emailed to you are provided as general market commentary, and do not constitute investment advice. Raseed will not accept liability for any loss or damage, including, without limitation, for any loss of profit which may arise directly or indirectly from use of or reliance on such information. Each decision as to whether an investment is appropriate or proper, is an independent decision by you. You agree that Raseed has no fiduciary duty to you and is not responsible for any liabilities, claims, damages, costs and expenses, including attorneys’ fees, incurred in connection with you following Raseed’s generic investment information. Raseed makes no representations as to whether a particular investment is appropriate or suitable for you.


View important disclosures