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Long Term Vs Short-Term Investing: Why Your Time Horizon Matters For The Type Of Investments You Make

Your investment horizon will determine the type of investments you should be making.

This article was written in collaboration with UOB Asset Management. All views expressed in this article are the independent opinion of based on our research. is not liable for any financial losses that may arise from any transactions and readers are encouraged to do their own due diligence. You can view our full editorial policy here.

It’s always easy to see what others are doing and try to emulate them. Think of the times we ordered a specific dish because we saw someone else having it, or how we visited certain places overseas because of what we saw being posted on Instagram and TikTok.

When it comes to investing, however, following what others are doing without taking into consideration our time horizon can get us into trouble.

I recently bumped into a friend at the gym who shared with me the mistakes he had made in his investment journey over the last few years. Unsurprisingly, like many of us, his portfolio had taken a beating in 2022 due to global markets declining. Not wanting to discourage him, I replied that as a young person, he could easily afford to ride out the current bear market and should continue investing a regular sum each month. After all, some of the best-performing days are when markets are down.

The mistake, however, wasn’t that he thought the market wouldn’t recover or that he regretted the companies he had invested in. He still believes the investments he has made will pan out in the long-term.

The problem is his time horizon.

As a young person, he wants to purchase a home soon. Unfortunately, because the money he had saved over the last few years had been invested in the portfolio that is incurring losses, he can’t readily liquidate it now.

Unless he is willing to take a loss on his investment by selling when markets are low, he can’t use the funds to help him purchase a home. In addition, he also cannot capitalise on the low prices in the market by investing more each month, as his monthly savings are now set aside for his upcoming home.

Short-Term Vs Long-Term Investing

Often, we hear investment experts share the need to take a long-term approach to investing. Quotes like only buy something that you’d be perfectly happy to hold if the market shut down for 10 years” from Warren Buffet emphasise the importance of long-term investing.

The likelihood, however, is that as investors, we would have multiple investment goals across different time horizons. For example, an investor might save up to buy a home in three years while at the same time planning for retirement in 30 years. Both goals are equally important.

Or, if you are like me, a parent, your investment goals may include upgrading your home in five years, planning for your kids’ education in 10 years, and aiming for early retirement in 15 years. And you want to work towards each of these goals concurrently.

Different Goals Require Different Investment Strategies

The challenge, however, is that all of these goals require different investment strategies. Having only one portfolio to cater to these goals isn’t logical, since these goals have different investment time horizons.

For instance, if our investment goal is to save up for the downpayment on a property in 3 years, it may not be ideal to invest aggressively in equities that tend to be volatile. Without enough time in the market, an investor, like my friend, won’t be able to ride out the downturns. And being forced to sell our investments during a downturn instead of waiting for the upturn is likely one of the worst investment decisions we can make.

To help us achieve our goals, we can use a robo-advisor such as UOBAM Invest by UOB Asset Management. Available on both the App Store and Google Play, UOBAM Invest allows us to take a goal-based investing approach. Whether it’s short-term or long-term investing, we can invest in a portfolio created based on the time horizon we have.

For example, if I choose a goal of buying a house in four years based on a risk profile of “Moderate”, I get a recommended portfolio that is geared towards a greater allocation of bonds (70%), as compared to equities (28%).

On the other hand, if our investment goal is long-term, such as a retirement that will take place in 30 years, we can afford to allocate a slightly higher proportion of our portfolio to equities.

For both portfolios above, the risk profile I have chosen is Moderate. Depending on our risk tolerance level, we can be classified as Very Conservative, Conservative, Moderate, Aggressive or Very Aggressive.

The portfolio created for our goals is based on three factors. Our 1) risk tolerance level, 2) investment objectives and 3) investment time horizon. This ensures that we don’t—after accounting for our risk tolerance level—invest too aggressively if our goals are near or too conservatively when our goals are still decades away.

Utilising The Glide-Path Model To Reduce Risk As Our Goals Approach

Rather than maintaining a fixed allocation towards equities and bonds throughout the duration of our investment, UOBAM Invest employs the Glide-Path Model to help us reduce portfolio risk as our investment time horizon approaches.

How this works is that the portfolio will automatically rebalance from higher to lower-risk assets as the end of the intended time horizon approaches. For investors who don’t want to have to worry about constantly monitoring our portfolios, this is a useful feature to have.

Understand Your Probability Of Success

One nifty function I like about UOBAM Invest goal-based approach to investing is that the portfolio planner tells me my probability of success for each of my goals.

For example, I am looking to save up $150,000 in the next 12 years for my kids’ education.

For this goal, I intend to set aside $700 a month, or $100,800 over 12 years.

A portfolio consisting of equities (37%) and bonds (61%) is recommended to me for this goal.

I can see the detailed breakdown of the asset allocation.

Based on my inputs, UOBAM Invest projects that there is a 50% chance of me being able to achieve my goal.

This is a realistic way of projecting whether or not the goals can be achieved. After all, returns in the market are never guaranteed, so it’s better to have a sense of how probable (or improbable) our goals are based on the timeline we have, the amount we choose to invest, and the level of risk we are willing to take.

With UOBAM Invest, we can start investing from as little as $1 with no account opening or closing fees. Furthermore, there is no lock-in period for our investment, though ideally, it will be best to leave our investment monies untouched until we achieve our goals.

Management and rebalancing of our portfolio are also done on our behalf.

Regardless of whether our goals are short- or long-term, there is no doubt that it’s always better to plan earlier rather than later. UOBAM Invest makes it easy for us to start investing towards our goals so that we give ourselves the best possible chance to achieve financial success in whatever we are working towards.

With UOBAM Invest, you optimise up to 10 different portfolios and invest for your various financial goals. Sign up for UOBAM Invest to receive S$10 credit when your account is approved. Terms and conditions apply.

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