Daniel Mewes, Head of Investment Solutions at PostFinance, explains in 45 seconds how the investment horizon affects the investment.

Daniel Mewes passed our challenge with flying colours. But the 45 seconds went by very quickly. So, as a refresher, here’s the detailed answer to the question „What effect does the investment horizon have on the investment?”:

Before deciding on an investment, it’s important to consider how long you wish to invest for or when you will need to get back the money you have invested. Investment horizons can be classified as short-, medium- or long-term. Risk also plays a key role: if you will need your money again soon, you can assume less risk than when investing long-term. Price fluctuations and stock market corrections can generally be compensated better with long-term investment. It’s also important that you are aware of how much risk you can or wish to assume overall.

If you are investing over just a one- or two-year period, funds with a higher proportion of bonds are most suitable as they generally entail less risk than shares, for example. The longer the investment horizon – i.e. the planned duration of the investment – the higher the proportion of shares can be.

The article «Why long-term investments are important»explains more about investing with a long-term horizon.