Plan Your Prosperity: The Only Retirement Guide You'll Ever Need, Starting Now--Whether You're 22, 52 or 82

Chapter 4

Time Horizon—Longer Than You Think

In selecting an appropriate benchmark (the core of your retirement investing plan and driving all later investment decisions), your first stop is time horizon.

One of the bigger mistakes investors can make is underestimating time horizon—or having a fuzzy or ill-defined one. It can lead to major errors—ones that may not be evident immediately and maybe not for many years. Those can be the most insidious kinds of errors.

And most of the time, the errors stem not from mistakenly having too long a time horizon, but too short. By not correctly assessing time horizon, investors might, for example, underestimate how much growth is appropriate to reach other goals, which they might not realize for 10 or 20 years. At that point, it could be too late to make a material enough shift to rectify it. Or your time horizon 20 years later might indeed be much shorter, which means a different benchmark is appropriate for you. Either way, the damage may already be done.

In this chapter we’ll cover:

• Why ignoring opportunity cost can be perilous.
• What exactly time horizon is. (Hint: It’s likely not how long it is until you retire.)
• The impact time horizon has on your benchmark.