What's Your Timeframe?

This week’s article is going to be short, however, the topic is one that may cause you a bit of thought afterwards. I am tackling one of the most important questions you as an investor need to think about. And the focus here is on investments. Let’s jump to it.

The question is – What is your timeframe?

That’s it.

I was reminded of this critical component of successful investing recently with a blog post. I believe it was from Sam Ro, but I read a lot so it could have been another source. Regardless, I feel it is important enough to share a few quick comments.

First, I am not necessarily talking about the Warren Buffett philosophy of holding a good stock forever. That is more of an endowment approach to investing. Instead, I work with individuals and their timeframes are not infinite. And usually, there are multiple timeframes.

For example, if a set of clients comes to me and says they have a big home improvement project planned in the next 24 months then the investments should reflect this. Instead of heading to the most volatile (bouncy) end of investment options we will focus more on boring old investments like Cash and Short Term CDs.

On the flip side, let’s talk about a client who is 45 and isn’t planning on touching their Roth IRA until they are retired in 20ish years. Well, we may go to the aggressive investment side there for a few reasons. First, the longer the timeframe the better the odds the investment returns will be positive. And possibly more important is this is a Never-To-Be-Taxed-Again account. Why not let the aggressiveness exist in this type of account and then you can balance your overall allocation with less aggressive holdings in accounts that will be taxed.

Timeframes are part of the reason I am a HUGE fan of Buckets with investing. The short version is investments you may need to tap sooner should be more conservative. Those down the road for access can be more aggressive.

The important thing is you need to give some thought about your Timeframes for your investments. Actually, I put the onus on your financial planner to ask you the right questions to help develop the strategy designed solely for you.

Final though – if your financial advisor says your timeframe is simply subtracting your age from 100 and then putting this amount in stocks, you need to run, run away!