Investment Time Horizons

We realize the importance of investing for a secure future, and to that end time horizons are integral. Defining goals and setting a timeline for their achievement keep us on our toes. Some goals are so critical that they best be achieved in a certain time frame.

Importance of time horizons

Goals with realistic achievement timelines are great for determining the right investment that will help achieve them. Investments are modeled to suit long, medium or short-term goals, and ‘risk factors associated with each investment also tend to vary over a period of time, stocks are an example of this.

Allocating Assets

This process involves dividing portions of a portfolio into various asset classes like stocks, bonds, or cash.

Short-Term Time Horizon

While there is no rule as such for what constitutes acceptable timelines for Long, Medium Or Short term time horizons, but the general rule of thumb is,

The short term is usually under 1 year. The focus here is on safety and liquidity so the investment is in cash or cash-related instruments, money-market funds, or short-term bonds.

The goals for this horizon can be like a vacation, emergency funds, etc. so it does not make sense to risky assets

Medium-Term Time Horizon

Anything between 1 and 3 years is considered a medium-term time horizon. Children’s education, marriage, starting a business, etc. are examples of medium-term goals.

For this, the portfolio will have to be a balanced combination of stocks and bonds without overexposure to risk

Long-Term Time Horizon

Goals that are more than 3 years away can be considered as Long-term investment horizons.

Typically, the goals would be something like retirement or financial independence. Since the goals are so far away, investors can take more risk, so the returns are higher. Most of the investment would be into stocks and other risky asset classes. It’s advisable to allocate 80% of the investment in stocks and 20% to bonds for long-term goals.

Intraday Trading Time Frames

Time frames in day trading or intraday are absolutely critical. Below we’ll elaborate on the various time frames for different trading types,

Intraday Traders usually prefer 10, 15, 30, or hourly time frames to enter and exit trades, however, there are trades that can last longer and potentially yield better returns, which time frames are suitable then?

Hourly or 60 Minute Chart

This is great for Swing-traders to take trading positions that are more than a day but less than a week.

Daily Charts

This can be used for entering trades which can last from days to weeks.

Weekly Charts

This can be used for entering trades which can last from a month to a few months.

Monthly Charts

This can be used for entering positions that will be more than a year.

So there you have it! Use the time horizons and time frames to create a solid investment portfolio and intraday trading.