The investing time horizon can be a big factor in setting investment objectives and shaping investor outcomes. Yet, it’s a contentious issue in finance as there is rarely any consensus on what a long or short time horizon really means. One way to think about time horizon is through the lens of an investor’s objective. A young worker investing for retirement could have a 30- to 40-year time horizon, while one who is investing for a down payment on a home may have a shorter time frame in mind. It is important to understand investors’ time horizon as it affects the kinds of opportunities they can capitalise on, the approach to investing, and the types of investments made. It can also determine how much risk investors are willing to take. Capital Group has written a paper that highlights the core findings from research on the issues surrounding investment horizon, considering them through two perspectives – that of the asset owner and the investment manager. Investing is defined as investing in public equities and for longer-term objectives such as retirement.
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