IN Part 1 of this article, published last Sunday, we discussed what a time horizon is and how it should affect the selection of your investments. As a quick recap, the time horizon is the length of time an investor expects to own their investment and can be determined by estimating the length of time it will take to reach a particular financial goal. The less time you have until you will need the invested money is the more conservatively you should invest, since you are unlikely to have enough time to recoup any losses if they occur. In this continuation, we will be discussing the need to change your strategy as your time horizon reduces.
Quite often, investors put their money into an aggressive investment, such as growth stocks, and then keep it there indefinitely. This is not a smart move. An investment may be a good choice for you at the time it was purchased but it can become less and less appropriate as time passes and your time horizon reduces.
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