One of the most mis-understood aspects of financial planning and investing is time horizon.  Perhaps the best place to start is to look at life expectancies for couples at age 65. Assuming neither smoke, there is likelihood (greater than 50% probability) that one of the two will still be alive at age 90. Therefore, even at normal retirement age (or at least used to be "normal"), the time horizon is quite long.

Even so, many investors have pulled in their investment allocations over the past 2 or 3 years, reflecting the concerns about the overall economic environment. This belies a proper understanding of time horizon.  It is extremely difficult to generate real life investment returns that will maintain purchasing power protection (i.e. offset inflation) for the long term with investments that are short-term oriented.

Properly assessing time horizon is important so that you can match investments with specific planning purposes. If you are investing for something a few years away (such as buying a house or college education), that is far different from trying to fund retirement over a 25-35 year period. No one knows what the markets may do over a few months or even a few years. We do, however, have significant market history that directs us as to longer timeframes. (The document, Excess Returns of Stocks Relative to Bonds, substantiates this fact.)

Part of being a successful investor entails focusing on the "why" you are investing. Because of the ravaging impact inflation has on purchasing power , even investors in their 70's and 80's may still find a need to have much if not most of their financial assets invested with a long time horizon.

We are happy to sit down informally with friends, family or colleagues. We can take a quick look at how they are approaching financial decisions and pass along impartial guidance. There is no obligation for this second opinion service.  Our aim is to help clients create wealth by intention.