Align your investments with your time horizons

Folk who have been regular readers of our Communiqué may not have understood our views on long-term investing.

We all have different investing goals and different time frames for achieving them. Some are short-term, like saving for a vacation or a car, while others are long-term, like retirement. In addition, every investor has a different comfort level with investment risk.

The type of investments you choose will depend on whether you're saving for long-term or short-term goals.

• For your long-term goals, you may want to consider long-term, growth-oriented investments like general equity unit trusts. With this long-tern view of your investment there is no need to try and take profits should the market be at exceptionally high levels. While risk sounds like something to avoid, there can be an upside - greater risk may offer the opportunity for greater rewards over the long term. The longer your investment time horizon the greater you can afford risk.
• Your time horizon is the expected length of time you will be investing in order to meet your goal. Determining your time horizon will help you decide which types of investments are appropriate for you. If you have only a short time until you need your money, you will not want to invest in something that could cause you to lose your investment. If your time horizon is longer, you will be better able to recuperate from a bear market. A longer time horizon allows the investor to assume more risk. Hence, the length of your time horizon helps determine how much risk you should take.
• The second is the amount of capital you have available to invest. You should never invest more than you can comfortably afford to be without during your time horizon.
• Your short-term goals call for investments that are more conservative, and more accessible. For example, if you're investing to save for a deposit on a home, you'll want quick and easy access to your funds and you will not want to take on any major risk.

Monthly unit trust investors must take cognisance of rand-cost averaging and not try and “time the market”. Investing on a monthly basis will buy more units of a unit trust when prices are low and fewer units when prices are high. Provided the fund gains value over the long term, you will profit from your purchases during short-term declines.

Silke Financial Services offers advice on funds at all levels of risk. We research the market in order to find the most appropriate funds at all risk levels. But don’t make the mistake of disinvesting if you are a long-term investor.

Words from the Wise:
"If you are going to sell every time the stock goes down, you will never win, anymore than a general who always retreats when the enemy advances." – John Train