What is an investment horizon?

An investment horizon is the length of time before you need to draw on your savings.

Your investment horizon is a key factor in determining how to invest your money. For example:

  • If you need your savings in 6 months to put a deposit on a house, you are better advised to place the money on a time deposit rather than buying risky shares whose value could fall over the next 6 months.
  • However, if you’re putting money away in a KiwiSaver for 25 years, buying risky shares makes more sense than time deposits because they are much more likely to outpace inflation and provide a better retirement outcome.
  • In fact, your KiwiSaver investment horizon extends well beyond when you turn 65 because you are likely to be drawing on your savings over your retirement which maybe another 30 years.

kōura will recommend to you a portfolio which is appropriate to your investment horizon.

  • A longer investment horizon means you can afford to take more risk in order to earn higher returns. Because markets are cyclical, market downturns are inevitable, but your investments will have time to recover. Our advice will be to have a higher proportion of growth assets.
  • A shorter investment horizon means that you will need to have a lower risk portfolio. If there is a significant market downturn, your portfolio may not have recovered by the time you need the money. Our advice will be to have a higher proportion of safer income assets.

kōura believes that most KiwiSaver investors, even the older ones, have a long-term horizon because they should not be cashing out at age 65 and putting their money on time deposits. They should stay invested and draw on their funds over time, possibly another 30 years. This means they can still benefit from a significant proportion of growth assets.