What is an investment horizon?
Also known as the time horizon, the investment horizon is a time window that the investor will keep security or maintain a portfolio without making any changes in any of its share. The duration of the horizon is an important element in the portfolio management process, because the idea is to generate as much return as possible, with regard to the amount of risk that the investor is willing to assume. Depending on the type of security and individual investor strategy, the investment horizon may take a matter of hours or even years.
different types of securities can have a built -in investment horizon. This applies to bond problems that come with the date of maturity. In most cases, it requires gaining the highest return rate on the bond problem to keep the security until the bond reaches full maturity. However, this window of time is not so easy to identify with other types of investment.
When selecting investment in pension plan, such as 401 (k) or personal pension planStor probably included at least some shares in the portfolio. Securities, such as this type, are excellent elections as long -term investments, despite their generally higher volatility, as they generate a constant return over time. The investment horizon of shares in this situation can therefore be up to thirty years. Since the investor is approaching the retirement age, he may decide to trade shares and go with investments from solid income that will regularly generate income.
The same manifestation tends to have a short -term investment horizon, so they are less attractive for anyone who thinks about continuous purchase and selling assets. When the strategy requires the use of a relative short investment horizon, the investor is likely to look for stock options that argue to increase the value for several days or weeks, peak and then reduce value. The aim is to get these shares just before the start of the rise, to hold them just before they reachat their peak, then sell them for profit before they start re -reducing the value.
As part of the technical analysis of any portfolio, it is very important to determine the investment horizon associated with any investment option. It is much easier to determine how long the investor would be in the best interest of the investor after acquiring safety. A view of this factor will help the investor in deciding on wise decisions that increase his chances of efficient and efficiency of portfolio management.