If you’re investing with a goal in mind, you’ve probably got a date in mind too. If you’ve got a few goals, some may be further away in time than others. Having a different time horizon means you'll probably have different strategies for your different investments.
Investments rise and fall in value, so it’s sensible to use cash savings for your short-term goals and invest for your longer-term goals.
Most investments need at least a three to seven-year commitment, but there are other options if you don’t want to invest for this long, such as cash savings.
If you can commit your money for at least eight years, a selection of investments might suit you. Your investments make up your ‘portfolio’ and could contain a mix of funds investing in shares, bonds and other assets, or a mixture of these, which are carefully selected and monitored for performance by professional fund managers.
Let’s say you start investing for your retirement when you’re fairly young. You might have 20 or 30 years before you need to start drawing money from your investments. With time on your side, you might consider higher-risk fund exposure that can offer the chance of higher returns in exchange for an increased risk of losing your money.
As you get closer to retirement, you might sell off some of these riskier investments and move to safer options with the aim of protecting your investments and their returns.
Your time horizon i.e. how much time you’ve got to work with will have a big impact on the decisions you make. As a general rule, the longer you hold investments, the better the chance they’ll outperform cash – but there can never be a guarantee of this.
You can also read our Guide to Investing which provides more detail on investment goals and time frames.
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