What it is
This is the period of time in which you plan to keep your money in an investment before pulling it out. In most cases, it's when you’ll use it for your money goal, which is the purpose of your investment.
A time horizon is usually classified according to its length. A short-term time horizon lasts up to 3 years, while a medium-term duration is between 3 and 10 years. A long-term time horizon means you can stay invested for 10 years or even longer.
What it means for you
Knowing your time horizon is essential for choosing the right investments for you.
That’s because, if you’ll need to achieve your goal many years from now, you can consider investments that are relatively volatile (but still matching your risk profile). The longer duration means that your money could have more time to grow despite the market cycles it experiences.
Of course, if your time horizon isn’t far off, you’ll know that you should consider less volatile investments to avoid the chances of needing your money at a time when the market is down.
Depending on your situation, you may have different time horizons for each goal. This means that the products you put your money in won’t be the same for all.
