Saturday 10 September 2011

Investment Time Horizons


The length of time over which an investment is made or held before it is liquidated is known as Investment Time Horizons. Time horizons can range from a day, in the case of a day trader, all the way up to decades for a buy-and-hold investor example real estate.

Before starting financial planning you should know various time horizons and its products, Depending on your need you can go with below mentioned time horizon.

Shortest Time Horizon (< 1 Year) 
Shortest time horizon investment are not ment to grow your money, It’s just to maintain the liquidity of your money say for example Emergency fund. However for day trader it can be an investment but you cannot totally depend on such investment.
  • Cash on Hand
  • Bank Savings Accounts
  • Liquid & Money market mutual funds
  • Gold
Short Time Horizon (1- 2 Years)
Short time horizon investments are just to preserve the purchasing power of your money for the purpose of near future. You cannot expect very high return from it. Because of volatility equity is not ment for short time horizon.
  • Short term Debt Mutual Funds
  • Bank Fixed Deposits
  • Gold
Medium Time Horizon (2-5 Years)
Medium time horizon investments are to compete with inflation and expect growth with time. Again due to volatility equity is not ment for medium time horizon
  • Bank Fixed Deposits
  • Debt Mutual Funds
  • Real estate funds
  • Gold
Long Time Horizon (> 5 Years)
Long time horizon investments are to multiply your money & build Wealth and can expect financial freedom. Equity is the best Asset class for long time horizon. It is used for long term financial goal like retirement or for big buy like buying home.
  • Equity (Stocks)
  • Equity Mutual Funds
  • Real Estate
  • Government & Private sector Bonds like PPF, EPF
  • KVP, & NSC
  • Long term mutual fund

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