Do your investment beliefs match your time horizon?

We all have different goals. This is especially true in the context of investing. Many of us are investing for retirement, some are saving for a home or higher education, and others are broadly striving to build wealth.

It is important to write down your investing goals, but it is equally as pressing to vocalize your financial aspirations. Making your goals known is a simple exercise in accountability. To ensure that you are kept on track, it is also necessary that you understand the time horizon associated with each of your goals.

If your goals are shorter-term (i.e., anywhere from tomorrow to about two years out), you should be in capital preservation mode. Occasionally a portion of the portfolio could include some relatively risky assets, but as a general rule you'd like to meet your upcoming obligation with minimal probability of failure. Examples are large, upcoming purchases such as a vehicle, home or tuition payment. To meet these payments you wouldn't want to bet the farm on a "hot" stock.

If your goals are leaning toward the intermediate-term, or between two and 15 years, there is room for you to take some risk in your portfolio. If retirement is near, risk should start to decline to ensure you've accumulated enough capital to live off. If the investor is motivated to make a large purchase within this timeframe, risk assets have the potential to compound returns and achieve goals in an accelerated fashion.

Possible loss of principal is an unfortunate circumstance that presents itself at this stage. Over intermediate-term periods, a full business cycle is likely to be experienced, which, on a positive note, should smooth out any bumps in the path to your goals. The key to success for intermediate-term investors is to avoid overreaction and herd behavior because only so many people can get out of a crowded exit at one time.

Moving out further into the future, nearly all investors have goals that are longer-term in nature, or greater than 15 years. Key to success for investors with longer-term goals is staying the course and not making emotional decisions with your portfolio's investments. One key tenet to remember for your longer-term investments is that good investment ideas are built on the promising prospects of the future and the solid fundamentals of today.

Aimlessly throwing money into an account or at an advisor will get you somewhere, but wouldn't you prefer to know where? That is why it is important to write down your investing goals. Equally as important, you must also match the proper time horizon to each goal. Attaching a long-term view with a short-term goal could lead to failure, and vice versa.

Failure can be avoided with proper preparation and organization. The probability of success can be increased with two steps; clearly state your financial goals and then talk to your advisor who can match appropriate investments to your stated time horizons.


Charles T. Trible is an investment assistant for Karpus Investment Management, a local independent, registered investment advisor managing assets for individuals, corporations, nonprofits and trustees. Offices are located at 183 Sully's Trail, Pittsford, N.Y. 14534, or call (585) 586-4680.

Published: Fri, Feb 13, 2015