Choosing Investments Based on Your Time Horizon

Investment goals differ from person to person. You may want to save up for a vacation at the end of the year, while your friend could be planning to buy a house. So, how does one bucket these goals?

Well, one of the many ways to do it would be based on the investment horizon. Is it a short-, medium- or long-term goal?

For instance, if you have a short-term money goal, say buying an expensive gaming console or painting your house, you should be looking at instruments like fixed deposits, recurring deposits and debt funds. They give you fixed and predictable returns and lower risk, making it easy to save towards a short-term goal.

Medium-term goals usually have a time horizon of one to five years. You have a little more time, so you can afford to take a little risk. Avenues like hybrid funds, company stocks or even gold investments such as gold mutual funds may be a good option. This may help you save towards home renovation or buying a new car.

When planning long-term goals, such as retirement or buying your own home, you need to diversify your investments to get the best returns possible. Equity investments can be great to generate wealth since they are known to give high returns. But they also carry higher risk. Alternatively, you could consider investments like Employee Provident Fund or Public Provident Fund more stable returns.