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Diversification and Investment Timeframe

Edward Ketterer • Jun 24, 2020

“Time In, Not Timing” 

You will have heard the term “Time In, Not Timing” when it comes to investing and I would qualify it with the following statement “Diversification and Investment Time Frame”. 


When we talk about Diversification in investing, we look at the traditional assets like property, stocks, bonds and cash. In some cases, we may consider more unique investments such antiques, paintings, structured products and Exchange Traded Funds (ETFs). Needless to say, how we allocate our money to each or a combination of these investments can very much depend on when we will need the money and this is where Investment Time Frame plays a crucial role in the selection of traditional assets and the appropriateness of unique investments in a portfolio.


As a financial advisor it is important to establish when a client will need access to their money as this will drive how investments are selected. The selection process will also be determined based on a client’s investment profile which is represented by their previous investment experience and their aversion to market changes and volatility. 
If managed portfolios (mutual funds or unit trusts) are used then the investment process they use in the selection of their underlying investments i.e. stocks, bonds, property and cash is the first part of the investment process. Followed by the geographic location of the investment - USA, Australia, Asia, Europe and the underlying currency - US Dollar, Euro, Yuan, Yen, UK Pound is the second part of the investment process. A third part of the investment process might include the use of hedging facilities to offset market and currency risk. These investment processes become important components of diversification and the investment time frame. As you can see the process of selecting an investment can be quite involved.

As a client you need to consider what your goal is in investing… is it for retirement, the purchase of a property, a child’s education… the list can go on. By determining your goal your advisor can outline how money is to be allocated or accumulated with each investment. Along with this is the need to consider your risk tolerance or as stated in the previous paragraph your aversion to market change and volatility which should be considered within the context of when you will be accessing the money to accomplish your goal. The point to remember is that things will change and the value of investments will go down as well as up.

You will find the video on the “4 Guarantees” included with in this website outlines some of the challenge’s clients can face and touches upon how a financial adviser can assist when it comes to Diversification and Investment Time Frame.

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