Investment Horizon
When do you need the cash?
That is, you're investing your hard earned after-usurously-taxed-dollars. When do you need them to be returned as dollars?
If you're 26 and investing retirement money, you need them back in 50 years or so. Maybe longer. So you want smaller, faster growing, albeit more volatile companies as your investment purview.
If you're 32, recently married, and need to save another 12 grand to make your down payment on the dump of your dreams, you can't take stock market risk, so maybe your horizon is 6 months, and you can only afford 6 month FDIC-backed CDs paying 2% interest.
And then there's the vast in-between. Venture capital and private equity funds usually run a dozen years or so. Hedge funds stamp a gain or loss every quarter. But many carry "you can't redeem your dough without a year's notice" clauses. They're all over the map, but time horizon matters a ton in making good investment choices.
Bottom line: the longer you have, the more risk you can generally take. Time here is your friend...and yes, it's ironic that, when you need the money least or least-soon, you do the best with it. Go figure.
Related or Semi-related Video
Finance: What is Buy and Hold Strategy?2 Views
Finance allah shmoop what is a buy and hold strategy
Your broker hates this You buy one stock and hold
it for twenty five years How is she ever going
to pay for her beach house when you pay her
no commissions Well that's her problem If you buy and
hold the right stock you'll have crushed it Making serious
bank had you bought ten grand worth of amazon after
it was cut in half following a typo wouldn't be
worth over ten million bucks today Shop around find another
next year by it Hold it live it so that
maybe in the course of three decades you've bought now
thirty stocks and you never sell or pay taxes well
it's that strategy in part that made warren buffett the
richest man in america and he's been up there for
a long time He picks one stock holds of forever
and just counts his dough and note When you buy
and hold the stock you don't realize a gain on
your taxes You keep everything it's very important when you
calculate financial returns That's nice work if you have the
brain and guts to put all your eggs in just
a small handful of baskets Picking the right stocks that
really work You gotta watch your step though When you
do that you know when i wind up with you
know egg on your face like the rest of us
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