In a world that offers more information than one can possibly consume and immediate gratification in any experience, the concept of time horizon has become a bit murky. For some perspective, when I got my first job in 1994, I remember looking in the newspaper and seeing a “markets” section where they had an assortment of stock and mutual fund ticker symbols showing closing prices per share. I owned one mutual fund at that time, thanks to an aunt looking out for her oldest nephew and youngest client. I would see the price once weekly, which was the only milestone I had, other than periodic statements. That single account provided a handful of investing life lessons that I will never forget, but one that sticks with me most was that I rarely saw it, yet it paid for my last semester of college. For scale, this was lawn mowing money and North Dakota State, but you get the point.
Obviously, I was a long-term investor, given my age and priorities, but in today’s world, staying on track with the plan would have been much harder. I could have opened a brokerage account, bought a stock from a social media influencer, and been convinced simultaneously that I had done the worst and most brilliant thing imaginable while also having real-time access to live pricing and account values on any device connected to the internet. I don’t know how teenage me would have reacted to the Game Stop fiasco we saw in 2020, but I can assure you that many learned tough lessons.
Definitionally, long-term is generally considered ten years or more. Things like saving for a down payment on a home or education planning for children end up in the intermediate-term goal section. Those complement a good mix of liquid short-term assets to maintain one’s lifestyle. We spend a lot of time identifying the time horizon for specific assets because it plays a significant role in how financial assets are invested.
It is also critical to monitor whether these time horizons change, warranting an adjustment in investment strategy. If you are 55 and looking to retire in 10 years, you might consider that a long-term goal. From a planning standpoint, we are looking at that asset out to age 90. From the Social Security Administration’s 2022 Trustees Report, a couple who is 65 today has a 50% chance that one person will be alive at 92. Your goal may be retirement in 10 years, and while that is long-term, that is not where your plan ends! We spend a lot of time discussing lifestyle in retirement and legacy, which require thoughtful planning beyond your retirement date.
Let’s make sure we are on the same page with all your goals. Reverse engineering your investments to fit into your financial plan is a much more productive exercise than having short-term external factors dictate your actions. Focus on your risk tolerance and true time horizon, and your discipline will pay off.
Investing involves risk. No investment strategy can guarantee positive results. Loss, including loss of principal, may occur. Material discussed is meant to provide general information and it is not to be construed as specific investment, tax or legal advice. Keep in mind that current and historical facts may not be indicative of future results. Diversification is an investment strategy that can help manage risk within a portfolio, but it does not guarantee profits or protect against loss in declining markets.
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. (C) Twenty Over Ten