What is the investment horizon? (OPINION)

Image: Corporate Finance Institute

Once you have known your investor profile, a topic that we discussed in a previous post that I share with you on Liderejecutivo.mx

When you choose an investment instrument, whether in a banking or non-banking institution, there are 3 variables that go hand in hand: the rate of return, the qualification of the instrument, and the term, also known as the investment horizon.

What is the investment horizon?
It is the time during which an investor plans to place money either in one or more different types of assets or investment instruments in order to obtain a profit.

Short term. Until a year. For this type of investment, liquidity is privileged (availability of withdrawing the investment). The performance is stable, but without risking the invested capital.

Medium term. More than one year up to 5 years. Capital placements are maintained for a longer time, this allows tolerating price fluctuations in the short term. Better returns are obtained from short-term investments but assume more risk.

Long term. More than 5 years. The objective is to achieve a strong growth of the capital invested in the long term, normally the capital is placed in riskier assets or instruments with marked fluctuation in their prices.
When capital is placed in productive projects, the investor knows at all times the destination of his investment and the business model of the company that is going to work with his money. As is the case of the PROVIFIN Financial Linkage Program, in which, through a standardized model, it offers alternatives for the investor in different investment horizons with attractive rates of return and under schemes of legal certainty.

If you are looking to grow your money, you must define the time in which you want that to be fulfilled. This “horizon” of investment can have many paths and also risks. It is important to have specialized financial advice.

In the case of investment funds, money is collected from investors who delegate the administration of their money to a professional who makes daily decisions about the purchase of securities that produce returns that seek to obtain the objectives of the fund. Here the investment horizon offers in some plans to withdraw the capital, but with high penalties. I recommend paying close attention to the conditions and getting independent financial advice.

In the case of Bank Notes, the investment horizon applies in the same way, however, the returns are often the floor of the rates of return, that is, they are the minimum offered in the market.
It is important to know the conditions of the project or investment instrument, restrictions, penalties and availability times since your money, as we have said, is gasoline for the economy and is in circulation generating wealth for you, for partners and shareholders of the company.

For Times Media Mexico / The Yucatan Times
Irving Alberto Escalante Castillo

Irving is a Public Accountant from the Autonomous University of Yucatan. He has a Master’s degree in Business Administration with a specialty in Finance from the Tec Milenio University. He has more than 20 years of experience in leadership of planning teams and execution of business projects, crisis management, and corporate finance. He has collaborated with companies such as MEGAMEDIA where he served as Director of Administration and Finance, is a Partner of the firm CONSORCIO of the Finance and Business division, Founding Partner and Executive Director of the Instituto de Enseñanza Tributaria IDET CONSILIUM, a training company specializing in legal, tax, patrimonial, managing partner of PROVIFIN, a financial linkage firm that operates investment and direct credits to companies and business projects.

The Yucatan Times