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What is an Investment Timescale?

What is an Investment Timescale? And how to use and benefit from one.

When it comes to investing there are quite a few issues to consider. Before you even think about what to invest in, and how, it’s important to think about your investment timescale.

 

First of all, what is an investment timescale?

An investment timescale – sometimes known as an investment horizon or timeframe – is straightforward in theory at least. It is the period over which you plan to hold an investment before selling it.

 

Why exactly do you need an investment timescale?

Quite simply, until you know your investment timescale you can’t decide what type of investments – such as stocks and shares, funds or bonds and so on – are suitable for your portfolio (and equally which aren’t suitable).

Investment timescale has implications for issues such as diversification and asset allocation – here’s an article which discusses diversification and asset allocation.

Investment timescale also addresses the issue of volatility. Historically markets go up, and they go down. Having an appropriate investment timescale can help to mitigate the impact of volatility.

A well-structured investment timescale also avoids the temptation to try and time the market – something we’d never recommend. Here’s a useful article on why we don’t.

Timescale also goes hand-in-hand with risk. Generally, the longer your timescale the more risk you may consider taking. The shorter your timescale the less risk you may consider taking. (But longer timescales may mean you can benefit from putting some money into riskier investments which may offer better returns.)

 

How to choose your investment timescale:

This is where things start to get a little more complicated! An investment timescale can range from (in the extreme) just a few minutes right up to several decades.

To decide your investment timescale you need to know where, financially, you are now and where you would like to be at a particular point in future, ie. to establish your investment goals.

Some people set their investment timescale based on their age and the period up until their retirement – which can be very appropriate, although it’s not the only timescale. You might choose some other event in the future, or a fixed period such as five, 10 or 20 years.

You can, if you wish, set your own investment timescale. However, as there is much to consider when choosing one it can make a lot of sense to take expert advice from a financial adviser.

An expert financial adviser will review your financial circumstances right now. They will talk to you about your objectives and plans for the future. Then they will be able to suggest a suitable timescale alongside appropriate investments to help you achieve your goals.

An expert financial adviser will also be able to review your investments from time to time and suggest any changes that should be made as your timescale runs its course.

By the way, investment timescales can also work very well alongside a regular savings plan. Once you know where you want to be in a certain period of time you can work out how to get there and accomplish it bit by bit, month by month, across the timescale you have set.

 

If you would like to find out more about the financial planning service we offer – or just find out more about W1 Investment Group – please visit our website.

 

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