Investment Term

Investment term plays a basic role in portfolio design. "Needs and wants may not coincide," says Ron Redfield, CPA, PFS. "Education is key to selecting an ideal investment term."

Full Article - Table of Contents

Investment Portfolio Management
(What's important?)
Investment Term
(How long?)
Investment Risk Tolerance
(How risky?)
Investment Advice
(Our Recommendations)

Investment Term
or “Wanting money isn't needing money.”

Investment term is the first of two major factors in investment portfolio management.

Investment term basically means the time frame allotted for investment.
How long are you planning on keeping this money invested?
Will you need all or a portion of the money in say 6 months or 2 years?
Perhaps you don't plan on touching the money for 15 years?

It is important that you differentiate between wanting and not wanting the money tied up for a specific short investment term period—versus needing to use the money in a specific period.

For example, an investor might have $130,000 to invest; yet $30,000 of that total might be needed for a car to be purchased in 9 months. Hence, we would look for a short-term investment for the $30,000 and consider various long-term investments for the remaining $100,000.

The owner of the money in this example might say the following: " I have no tolerance for risk of principal in my portfolio. I want only high quality fixed income investments such as, Certificates of Deposit or US Treasuries. I won't need the $100,000 for at least 10 years, but nevertheless, I want all of my money to be liquid and not tied up for more than 2 years."

This is an interesting example. We would attempt to educate the investor as to why they may want an investment term of greater than 2 years for a portion of their money. We might suggest "laddering" the portfolio.

Laddering is a term used for investing a portfolio in different time periods (like steps on a ladder). The purpose of laddering is that money is always coming due and could be reinvested at current interest rates.

When an investor determines his ideal investment term, it is important that he invest with his head and knowledge, and at the same time try to limit his own emotions in investing. Next, we'll look at investment risk tolerance, another individual investor preference.

About the Author

Ronald R. Redfield, CPA, PFS, is available for a free consultation and sample portfolio based on your investment risk tolerance levels. And you're warmly invited to request a complementary copy of Ron's text on investment philosophy.

Please contact Ron by visiting him at Redfield, Blonsky & Co., sending him an email, or calling him at 1 (908) 276-7226. Be sure and read Ron's latest commentary on financial investments, to keep up with market changes.

Investment Term

Investment Term or “Wanting money isn't needing money.”

About the Author

Investment Term
or “Wanting money isn't needing money.”