Investing – Time in the Market
Time is another critical factor in determining the earning potential of your investment portfolio.
If you’ve got time on your side to reach your savings goal, you’ll be able to consider the long-term trend of the higher risk, higher potential earning investment options. Most of these, such as shares, require you to ignore short-term fluctuations in value (which you can also account for by diversifying and stick with them for a period of seven or more years in order to achieve a more desired return.
Of course some short-term investors may get lucky and buy a high-risk investment at a time when it is beginning a rapid upswing in value – and be able to make a big gain in a short period of time. But if you’re not careful it’s equally possible that the opposite will happen.
In general, if you haven’t got time on your side to reach your savings goal (say, you need money for an overseas holiday in a year’s time) share-based investments, even if fully diversified, are not suitable. Short-term investment options, such as a one-year term deposit with a bank that offers a specified rate of return, are the ones to consider.
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