Time Horizon
May 23rd, 2007
Time Horizon is an investment and financial planning term that financial planners like to use. Time Horizon refers to the time frame of when you need to achieve your financial goals by. Time Horizon acts like a deadline for you to achieve your financial goal. After all, if you have forever to do something you might very well take forever. By having a time horizon, you ensure that you will have the funds when you want in the future.
Once your goals are established, aiming for a deadline is also very important. Write these down beside your goals on the same page. Examples:
- I want to Retire at age 59.
- My kids will be ready for college in 2014 & 2016.
- I will buy my Yacht in September of 2008.
- Bill Gates will be jealous of my portfolio before I die. (Life expectancy: 78 years old.)
- I will need some cash to get married with in 6 months from now.
The time until you reach your goals is crucial in deciding which investments you need. On top of your long term goals, you’ll also need to decide if you will need any cash in the short term for emergency or spontaneous usage. A portion of your investments should always be kept liquid in cash form, and what percentage of your portfolio is cash is something you should decide up front by weighing your short term needs.
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