Today's DueNorth Insight - Time Horizon

Today's DueNorth Insight - Time Horizon

September 22, 2021

On today’s DueNorth Insight, we’re going to talk about the role time horizon plays in investing. Should a 22 year old, just starting their first job save in the same manner as a 60 year old nearing retirement? Hopefully you answered no to that, cause that’s the starting point for today.

An investors time horizon is the amount of time they plan on holding their investment. Stated another way, it is the amount of time before they require their funds be returned to them.

Different savings goals require different time horizons. For example, saving for a car or a beach vacation is much different than saving for retirement.

Okay, so why is this important? An investors time horizon is the primary factor in determining an investors risk tolerance and the allocation for their investment portfolio.

A longer time horizon will generally allow an investor to take on more risk within their portfolio. This is because if the stock market has a temporary decline there is a longer period of time for the investor to makeup those funds. Conversely, the shorter an investors time horizon, the more concerned they are with safety of principal and they will have a less aggressive portfolio.

It’s crucial to periodically review your time horizon as your goals and your life change. And that’s today’s DueNorth Insight.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.