The Investment Time Horizon Pyramid

by RJ

in Investing

The following pyramid, which is a take off of Maslow’s Hierarchy of Needs,  consists of 5 different investment time horizons:

  • Less Than 1 Year
  • 1-2 Years
  • 2-5 Years
  • 5-10 Years
  • Greater Than 10 Years

Inside of each time horizon, are the recommended asset classes for reaching your goal. For example, if you had a goal that was 4 years away, you would look at the third box from the bottom and see that your recommended asset classes are Savings Accounts, Money Market Funds, CD’s, and Short-Term Bond Funds.

A Few Explanations…

  • The assets are listed in order of lowest to highest risk inside each time horizon. For example, a money market fund has less risk than a short-term bond fund and a long-term bond fund has less risk then a stock index fund.
  • This chart by no means includes every asset class. There are many I left out (gold, silver, art, etc…). However, one can easily get by with investing in nothing but the these asset classes.
  • You can always spread your risk out between different asset classes inside of each time horizon. For example, if you had a goal that was 7 years away, your portfolio can be split between a Money Market Fund and a Short-Term Bond Fund. Although, please don’t forget that you should rebalance once a year.
  • This chart is certainly up for debate. I’m a bit on the conservative side.  If you had anything you would add or change, let me know in the comments.

A Few More Things…

Hats off to Michael Piper from a great investment blog, Oblivious Investor, who inspired this idea with his asset allocation pyramid.

If any bloggers want to copy this image, go on ahead. A link back to the original is appreciated.

If you’re having trouble viewing the smaller print, press Ctrl + on your keyboard to zoom in.

Last, if  this image helped you out in any way, do you mind helping me out by posting this on your favorite social network? Thanks!

Related Posts on Gen Y Wealth


PatrickNo Gravatar June 23, 2010 at 8:53 pm

This seems pretty conservative, the only thing I would add is some dividend paying stocks even with a short time frame. You never know when you will need to stretch out your time line.

RJNo Gravatar June 24, 2010 at 3:12 pm

@Patrick – I’m a pretty conservative guy when it comes to short term investing., I would rather sleep at night and achieve my goal, then have potential to make a little more money. That’s why I didn’t include any dividend stocks. BP a few weeks ago was known as a dividend paying stock. It’s an extreme example, but it can happen.

Comments on this entry are closed.

Previous post:

Next post: