What is considered a long-term investment horizon?

A long-term investment horizon typically refers to a time frame where investors expect to hold their investments for an extended period to take full advantage of the potential for growth and capital appreciation. Choosing a horizon that is bigger than 5 years aligns with this concept because it allows sufficient time for investments to recover from market fluctuations and benefit from compounding returns.

In long-term investing, strategies often prioritize stability and growth over short-term market movements, which can be particularly volatile. Therefore, having an investment horizon beyond 5 years gives investors a better chance to ride out economic cycles and achieve their financial goals. Shorter time frames, such as those under 3 years or between 1 to 5 years, do not usually capture the broader market trends and growth potential associated with long-term investments.