For every investment, there is a time factor. A person is said to be an investor-only based on the time factor in which the person stays invested. It can vary from seconds to months, years, and even decades. Yes, it can be surprising when I say seconds as a potential time frame for investment. Yes, indeed it is a valid time frame and an individual can be an investor for just a few seconds especially in the case of day trading. The trading usually happens in seconds or minutes and until then the individual is an investor.
The prolongation of that investment is purely based on the gains they get. If there is no proper gain from that day trade investment, there is also a possibility that the individual can even become a potential long term investor. Some people also strongly believe that time is money. Especially when it comes to day trading an expert day trader would have noticed that a volatile market can give them so much of gain and all the credits go to time because only if they have the time, they will be able to reap profits from a fluctuating market.
I would like to clarify that there is no time frame for any investment and no one can predict how long should an investment lasts. It is purely based on an individual's needs and objectives. If an individual gains a good profit within days and they would like to liquidity their money, they are free to do so. But there are some schemes available that would force a time frame on individuals. For example, tax-saving investments in my country mandate the time frame from 3 to 5 years.
But when it comes to asset allocation, knowing the timeframe is very important. While choosing the type of investment, it is also important to choose the time horizon. The time horizon of an individual can also vary based on the age of a person. A 30-year-old individual is free to take risks compared to a person who is close to their retirement. If it is said that if you have a longer time horizon, it gives a good opportunity to be more aggressive compared to a retired person who has very little time.
Time can be a variable factor especially when it comes to investments that are highly volatile. Equity can be a good example of that. For a 30-year-old individual investing in equity can be fine because even if it is not giving a good return, they can prolongate the time horizon to make sure their return goal is achieved. Even in case of loss, they can always make up for some other investment. The risk factor also decides the time horizon.
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