What’s Your Perspective on Your Investing Time Horizon?

Among the myriad of important financial topics to think about, properly understanding your investing time horizon should rank near the top. Your perspective on what your time horizon might be is a crucial subtext of the overall question.

Of course, none of us know the precise answer to the time horizon question, because it’s not in our control. Therefore, this gives way to generalizations and assumptions. If you’re young, the assumption is your investing time horizon is long; conversely, if you’re old you assume the opposite. Accidents and health issues can obviously present themselves and invalidate these assumptions.

What is an Investing Time Horizon?

Your investing time horizon is a financial planning deliverable and helps determine where you should be in terms of overall investment risk. You can’t totally avoid investment risk, but financial planning can help you manage it.

It’s important to avoid letting the financial media answer the time horizon question for you. For the main, financial news seeks to keep you focused on short-term questions instead of the long-term. Eventually, you have to move beyond “what’s next” queries toward dealing with key questions important to your particular investing time horizon.

Understanding the Financial Market

While no one likes to endure financial market declines, historically markets have moved both up and down. It’s important to realize, however, these short-term increases or decreases in market values sometimes happen for reasons different than what you might think.

Even if you believe that you’re emotionally equipped to handle sizable market declines, it’s hard to know exactly how you’ll react until you experience a 20% or 30% pullback. This is precisely why you need clarity around your investing time horizon.

For many investors, the proper time horizon has more to do with flexibility than it does landing on a precise “correct” answer.

At its core, money is just a tool that can help you accomplish things that are important to you. Money can provide flexibility, a measure of freedom, and peace of mind. In the end, money is only as important as the mission that you assign it.

The Importance of Financial Stability

Having a reasonable perspective on your investing time horizon helps protect you from things you don’t see. So much of financial life amounts to being able to withstand surprises without totally abandoning your planning objectives.

One of the most common goals expressed by our clients is a desire to maintain a stable standard of living throughout retirement. This means accounting for inflation and the effect this has on your ongoing lifestyle expenses. You don’t know your exact time horizon, but you can assume that most of your expenses will likely rise as time marches on.

Increasing living costs are after all one of the primary reasons for investing and accepting some risk in the first place.

One helpful tool for aligning your investments with your time horizon is what I call the “buckets” strategy. Depending on your age and stage of life, you can create imaginary “buckets” that coordinate with specific investing goals. For instance, even if you have a very long overall time horizon, it’s likely you have some goals with shorter timeframes. For that shorter term “bucket” your investments might look different from your longer term investments.

Through it all, the perspective you have regarding your investing time horizon is all important. Don’t try to overthink the question. Instead, let your planning principles guide you toward decisions that align with both your time horizon and long-term goals. Start there. Ready for a real conversation?

Disclosure

Apollon Wealth Management, LLC dba J.E. Wilson (Apollon) is an investment advisor registered with the SEC. This document is intended for the exclusive use of clients or prospective clients of Apollon. Any dissemination or distribution is strictly prohibited. Information provided in this document is for informational and/or educational purposes only and is not, in any way, to be considered investment advice nor a recommendation of any investment product or service. Investing involves risk, and while remaining invested can support long-term goals, it does not guarantee a profit or protect against losses. Advice may only be provided after entering into an engagement agreement and providing Apollon with all requested background and account information. Please visit our website https://apollonwealthmanagement.com for other important disclosures.