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Trading and Investment Terms

Time Horizon

Estimated length of time for a plan, program, or project to complete, an endeavor to succeed, an investment to yield returns, an obligation to become due, a right to mature, etc.

 

The period, usually expressed in years, for which an investor expects to hold an investment.

 

Time horizon types vary from short-term to long-term. 

Long-Term: Investors with a long-term horizon can go onto building an aggressive portfolio 

Short-Term: Conservative investors will generally have a short-term investment horizon, and they go onto invest in safer instruments.

 

which is Best

Investments in equity front are advisable to be made with a long-term horizon. This is because a long-term horizon allows investors to ride the risk of volatility.

Also, investing in mutual funds with a long-term horizon allows investors to make good profits as they will benefit from the power of compounding. 

For short-term investors, it is always advisable to invest in bonds, which are considered a much safer bet than stocks. 

Similarly, it is not advisable for individuals, who are about to retire, to invest in stocks as they can suffer losses if they have a short-term investment horizon.

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