What is Your Investment Time Horizon?

by Oct 14, 2019

Investment Vehicles, Time Horizons and Your Financial Goals

How long you plan to hold on to an investment can influence the right method of investment for you.

While some investments are held for years or decades, others may only be viable for a few months (such as in the case of a certificate of deposit). The duration of your investment period, or time horizon, can have a significant impact on how and what you invest.

Whether you are looking to retire or “rewire,” timing is a critical component of your wealth management strategy.

What is an Investment Time Horizon?

An investment time horizon is the total amount of time you expect to hold a specific investment security or portfolio. Time horizons should be dictated by your investment goals and willingness to risk exposure.

A time horizon can dictate the breakdown of funds and how they are allocated across a portfolio, so saving for retirement 30 years into the future looks a lot different than planning a vacation in 18 months. The goals and time horizons are quite different, which lead to different investment strategies.

Long vs. Short Investment Time Horizons

Investment time horizons can be grouped into three categories: short-term, medium, and long-term.

  • Short time horizons: Less than 5 years; example: saving for a specific event such as a new car or vacation
  • Medium time horizons: 5 to 10 years; example: saving for a second home or college
  • Long time horizons: More than 10 years; example: saving for retirement


The way you invest during each of these time horizons may include different allocations of funds within your portfolio. Understanding how you want to use funds in the future can impact how to invest and the risk associated with those assets.

The shorter the time horizon, the more likely it is that you’ll choose a lower-risk strategy with slower growth potential because downturns in the market can come with more immediate financial implications. With long-term time horizons, more risk is often favored with the anticipation of a potentially higher return.


Planning Your Investment Time Horizon

Many investors have more than one investment time horizon. A Certified Financial Planner can help you understand your goals in relationship to different investment time horizons and how to incorporate them into your overall plan.

At Shira Ridge, we’ll help you create a “living” plan that changes with your life and includes realistic strategies to enable your financial success. We play an investment-advisory role that includes financial planning and portfolio management, as well as uses a mix of investment types. We’ll review your plan and time horizons annually, accounting for changes to your goals or life plans.

As a fiduciary, your best interest is the top priority at Shira Ridge, and we can help develop an investment plan that’s right for you.