The length of time that you plan to invest your money is known as your “investment time horizon”. It is important for determining the type of investments that should be in your portfolio.
The longer the time frame before your funds are required, the more you can allocate to growth assets (ie Shares and Property), which have more volatility but should provide better returns than defensive assets (ie Cash and Fixed Interest) over the longer term.
If, on the other hand, you only have a couple of years over which to invest, you are generally investing for the short term and security may be more important than higher returns. Accordingly, you might place a greater emphasis on investments in short-term, more secure assets, such as cash and fixed interest.
Over time, investment markets move up and down as does the value of your investments. If you have many years over which to invest, you may be prepared to take on more risk. In this situation, with more time to ride out any short-term fluctuations in investment returns, you have the opportunity to benefit from the higher expected returns offered by growth investments such as shares.