How are investments divided according to the time horizon?

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Financial lexicon Financial lexicon

Depending on the expected duration, systems are divided into:

  • Short-term
  • Medium-term
  • Long-term

Short-term investments have a time horizon of no more than 12 to 18 months. A short-term horizon is usually chosen to manage liquidity in excess of normal cash needs. These investments can usually be easily disposed of in case of need. Not surprisingly, therefore, this type of investment can also be 'tactical', waiting to decide when one has clearer ideas or the markets provide more security.

Medium-term investments usually refer to time periods between those defined for short-term investments and three years.

Long-term investments, on the other hand, are those that refer to several years of time horizon and are usually those that most need professional advice. Unlike short-term investments, medium- and long-term investments require a more 'strategic' approach.

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