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An Investment Horizon refers to the length of time that investors are willing to hold their portfolios. Investment horizons can be classified as:
1. Short term: These are investments with a short horizon of 3 months to 2 years. With these, money can be accumulated for a particular objective in a short period. For example, to create a reserve fund for unexpected spending.
2. Medium term: Investment with a medium-term horizon of 2-5 years. This is good for monetary needs that could arise in a few years.
3. Long term: Investments with longer-term horizons of 5 years or more. This could be used after retirement, or for children to study, and other longer-term goals.
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