In the short and medium term, shares can even face high fluctuations, but in the long run, the risk of a loss decreases. On the other hand, if you are saving primarily for your retirement in 30 years' time, it might be a good idea to invest a substantial part of your savings in shares, which are risky but have higher expected returns. In this case, it would be appropriate to invest a fair slice of your savings in things that are not so risky, such as deposits and short-term government bonds. For instance, if you are thinking of buying a car with your savings over a period of two years, you certainly don't want to take the risk of only being able to afford a wreck because, for example, the value of the shares you bought with your savings has dropped: indeed, shares are very risky in the short term. Why is the time horizon of an investment important?Īt this point, you may have understood that the concepts of short-, medium- and long-term are inextricably tied to those of financial risk. This is important, because if you keep an investment in shares for at least 10 years, the risk of purchasing at the highest price and selling at the lowest, which is the worst scenario for your savings, is reduced. If we talk about the long run, perhaps the definition of 'over 10 years' is more useful, because periods as long as that probably cover a whole financial cycle - with many fluctuations in the stock market - that some experts believe lasts for seven years on average. There are no exact definitions, but short-term usually means a period shorter than two years, medium-term covers a range from 2 to 5 or 10 years and long-term is a period longer than 5 or 10 years. How long are short- medium- and long term? the period you imagine leaving your money invested without needing to spend it. When referring to financial investments, short-, medium- and long-term refer to the 'time horizon' of your investments, i.e. At this time of losses in the stock markets, some people may suggest that you keep your investments in shares if you have long-term objectives. You will find out that keeping your money in the bank is more suitable in the short term bonds, such as many government securities, are suitable in the medium term and shares in the long term. If you contact a financial advisor, they will probably ask about your 'time horizon' (if they don't, find another advisor!!). If you are trying to get an idea of how to invest your savings, perhaps by searching for information on the web, you might easily come across expressions such as 'short-term', 'medium-term' and 'long-term', or similar ones such as 'short, medium and long run'. Perhaps these terms are ambiguous, but they are useful for choosing the best way to invest your savings, above all when uncertainty on the financial markets increases, as is currently the case.
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