What does "Investment Horizon Matching" refer to?

Investment Horizon Matching refers to the strategy of aligning the timing of fund usage with the intended duration of the investment. This concept underscores the importance of ensuring that investment inflows and outflows correspond appropriately with the investor’s financial goals and timelines.

For instance, if an investor plans to use the money in a set period—such as funding a child's education in five years—the investment strategy must support that timeline, ensuring that the investments selected will be liquidated or will mature around the time the funds are needed. This approach helps in managing both the risk and return profile of the investments, ensuring that market fluctuations don’t adversely impact the availability of funds when needed.

In contrast, other choices focus on different aspects of investment strategies, such as aligning an investor's age, selecting investments based on market conditions, or solely assessing the risks of prolonged investments, which do not specifically capture the essence of timing fund usage with investment duration. Matching the investment horizon directly addresses the temporal aspect of financial planning, making it an essential consideration for effective investment management.