When choosing investments, the term “investment horizon” is important. A long-term investor needs significant capital to invest. A high-risk, high-return real estate investment may be appropriate if you plan to hold it for a decade or more. A long-term investor may invest in high-risk, high-return real estate like a value-add office building, which requires a 10+-year strategy for renovation, stabilization, and refinancing.
Long-term
Investing over a long-term horizon (LTI) involves taking high risks and reaping high returns. Investors with this type of horizon generally choose to invest in securities that have a time frame of more than eight years. They are most suitable for risky investments, because it gives them enough time to contain their losses and learn from their mistakes. Long-term investment horizon is the best choice for new investors, who can use this investment strategy to earn high returns while reducing their risks.
An investor’s time horizon is defined by how long they intend to hold a security or portfolio. Depending on the amount of time they have to make a profit, the horizon may range from a few months to several years. Investors with a short-term investment horizon should invest in highly liquid instruments, such as treasury-bills and certificates of deposit. In this case, they should be cautious and avoid investing in unproven securities.
Duration
Investments differ in their long-term durations. Short-term investors, for instance, often aim to preserve liquidity. These investors may focus on generating steady cash flows and may avoid investing in high-risk stocks. Long-term investors, on the other hand, may aim for high-return investments that offer steady income and appreciation. There is no one-size-fits-all solution for every investment strategy. It is essential to understand the characteristics of your own time horizon before investing.
The most prudent investors should aim for a long-term time horizon. Investing in small-cap stocks can be risky in the short-term, but can provide higher returns in the long-run. In contrast, investing in big-cap stocks, which have a shorter time horizon, can yield greater returns. However, short-term investors should avoid making these investments unless they have the means to wait out a market correction.
Investing in high-risk, high-return real estate with a long-term time horizon
Investors with a long-term time horizon should consider a variety of strategies for maximizing returns. A clear time horizon will help investors allocate their portfolio effectively. The wrong approach can result in missed returns or worse, derailment of investment plans. Listed below are some strategies to consider when investing in high-risk, high-return real estate.
Those with a longer time horizon may consider investing in riskier real estate investments. A long runway will help investors recover from any significant economic shocks and market corrections. However, investors should still consider a balanced portfolio containing conservative assets and more aggressive real estate opportunities. These less conservative opportunities include value-add real estate deals and ground-up developments.
When investing, investors should consider their time horizon. Generally, the longer the time horizon, the higher the return. For example, investing in a small rental property for a short-term time horizon is a good idea, as long as the property retains its value. However, a longer-term time horizon will give investors more freedom to take on more risk and make more money.
Investing in high-risk, high-return funds with a short-term time horizon
If you want to invest in high-risk, low-return funds with a short-time horizon, be sure to do your homework and contact an investment advisor. The time-horizon that you choose will influence your willingness to take risks. It is also essential to do independent research, because the past performance of an investment product is no guarantee of its future performance.
The time-horizon for investing can vary greatly, depending on your goals and time sensitivity. A longer-term time-horizon, such as a couple of decades, may allow you to take more risk. However, if your goal is closer to the future, you may need to reduce your risk to maintain your current level of savings. In such cases, you might invest in high-risk, low-return funds that will provide you with high returns but also allow you to preserve your current assets.
Your time-horizon will also affect your investment mix. If you’re investing for two years, you may place 80% of your assets in stocks while the remainder in bonds. It is also important to know the risks associated with each asset class. A portfolio with 80% stocks and 20% bonds will provide you with more growth than an equivalent investment with a lower risk-return profile.
