HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%
XM information and reviews
XM
82%

Investment Time Horizon: Definition And Its Role In Investing


Beginning investors who come to the stock market are inevitably confronted with terminology that is new to them. An accurate understanding of this vocabulary makes it possible to quickly understand the principles of the investment mechanism and learn how to make all necessary calculations without errors. In general, for a beginner investor to start meaningful actions it is enough to assimilate a limited set of the most important concepts, which includes the investment horizon.

Investment Horizon - What Do You Need To Know?

The investment horizon is a multifaceted concept, and authors of publications and books on investing often use it in different ways. It is viewed as an interval of time:

In general, all these points of view are only special cases of the general definition of an investment horizon. It can be formulated as follows. The investment horizon is the time during which an investor plans to invest funds in certain projects and assets, expecting to achieve the set goal at the expense of the profit received. In this case, the notion of "investment of funds" includes the initial investment capital, additional investments, and reinvestment of income.

The investment horizon is one of the fundamental concepts for any investor. It must necessarily be defined (indicated) in your personal investment plan.

How Can You Determine The Investment Horizon?

There are two possible approaches to planning an investment horizon:

In the first case, the goal is formulated as specifically as possible, with an indication of the amount to be received and the terms for achieving it. This option is most suitable for beginning investors, as it allows choosing an investment strategy and defining a set of assets for investments.

A variant of investment planning with this approach looks as follows:

The calculation method of investment horizon planning is used by experienced investors, who can not only formulate an investment goal, but also correctly take into account important factors that affect its achievement:

In this case the stages of compiling a personal investment plan change somewhat:

In general both algorithms do not contradict each other and can be combined. In this case the upper limit of investment horizon is determined during initial goal setting, and its framework is adjusted after assets selection and expected return calculation.

What Investment Horizon Depends On?

A beginning investor should know what factors and how they affect the investment horizon - the length of time in which an investment goal can be achieved. These include:

The choice of assets has the greatest impact on the investment horizon. Their profitability is directly related to the time of investing: the higher it is, the lower the investment horizon.

That is why experienced investors relate the investment horizon to the portfolio structure:

All of the above considerations apply to a limited investment horizon. However, it can also be infinite, for example, when the goal of investments is to receive a permanent basic income. In this case, assets should be selected based on considerations of the right mix of dividend/coupon and speculative income.

Investment Horizon For Beginners

There are no fundamental restrictions on the choice of an investment horizon for beginners. The only recommendation that experienced investors give is not to invest all of the capital in a long-term portfolio. High-quality portfolio formation requires a solid knowledge and experience with assets of different markets and industries.

To accumulate such experience, it is better to allocate part of the funds to short-term (1-3 years) investments. It is advisable to follow all recommendations on the selection of reliable assets and diversification.

#source


RELATED

Crypto trading: what are cryptocurrencies?

Cryptocurrencies are digital money, which represents a class of assets that do not exist in physical form but are created virtually through computer technology...

How to Trade Forex on News Releases

A great advantage of trading currencies is that the forex market is open 24 hours a day, five days a week. Markets move because of news, so economic data...

Markets.com: Thousands of markets to trade

With Markets.com you can trade every market twist, turn and trend with a vast range of assets, including our thematic Blends, weighted baskets of stocks focused...

Bitcoin trading: how to trade bitcoin in 2020?

Bitcoin has become an extremely popular financial tool in the past few years. However, not many people are familiar with the basic concepts of this cryptocurrency...

What is spot trading in crypto?

Thanks to the volatility of the crypto markets, savvy traders are enjoying speculating on their price movements in hopes of finding positive trading opportunities...

What is Risk Management in Finance?

Risk management in the Finance industry refers to the process of identifying, evaluating, and mitigating risks of losses in an investment...

A Guide To Risks In DeFi: Are Exploits A Sign DeFi Is Still Too Risky?

At first glance, decentralized finance, called DeFi for short, is the next big thing in finance, ready to replace traditional banks and financial services that have been around...

What Made Bitcoin's Last Bull Market Different?

Bitcoin has experienced multiple bull markets, and this latest one, which began in 2018, is markedly different from the last. Between late 2018 and the time of this writing...

InvestLite: Bitcoin investment explained

Bitcoin is digital money that does not physically exist. However, there are special registers where information is stored about how many bitcoins someone...

How to Short Ethereum?

Want to profit from falling prices in ETH? Then you’re in the right place. In the following article, we’ll explain what shorting means, how to short Ethereum, and how you can profit...

Trading robots. Should you use them in Forex trading?

To increase the profitability of trading on the Forex market, some private traders and investment companies...

Standard & Poor's Rating: What It Shows And Why Investors Need It

Credit ratings help investors categorize issuers of stocks, bonds, or entire nations by their level of debt risk. Depending on the level of credit rating assigned, you can understand the level of credit risk...

Trading the FTSE All Share Index

The London Stock Exchange (LSE) is one of the oldest and most important financial institutions in the world, and in case you have heard of the...

How to avoid analysts' mistakes?

We often hear about an undervalued asset, an unfair exchange rate, or an overvalued dividend forecast. In my opinion, such "expert" statements...

High Frequency Trading (HFT) in the World of Retail Trading

High Frequency Trading, better known by its acronym HFT, is a buzzword in the forex trading industry. As the world of trading evolves with the rise of technology, the line between large institutional traders...

Is Ripple a good investment and can you profit on XRP in 2020?

Cryptocurrency trading has become a big business and is extremely popular for people just entering into the trading space, as well as for major institutional traders...

Tips to Help You Trade Indexes CFDs like a Pro

Investors are taking advantage of every trading opportunity in the financial markets to increase their financial power. One of the several investment opportunities...

STEPN: Libertex explains what you need to know about the "move-to-earn" crypto trend

STEPN (GMT) is a so-called "move-to-earn" crypto token that was launched back in the summer of 2021. However, the price of STEPN has recently picked up...

NEO Price Prediction: Invest or Skip?

NEO is not the most popular cryptocurrency compared to Bitcoin, Ethereum, Tether, and Ripple. Currently, it's ranked only 26 by CoinMarketCap...

Navigating the Exciting Challenge of Trading Over 150 Stocks with ModMount

ModMount presents traders with the exhilarating opportunity to dive into one of the largest and most dynamic online markets – the stock market. This platform challenges traders, whether novice or seasoned...

FP Markets information and reviews
FP Markets
81%
RoboForex information and reviews
RoboForex
77%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.