The relevance of investment horizon in returns

The investment horizon is a crucial factor that determines the returns on the investment. This factor is often overlooked by investors who expect to make a quick buck on the stock market within a matter of a few days or weeks. But the fact remains that real wealth can be created only over the long term and the sooner these investors realise this, the better it is for them. There is no short cut to wealth creation.

As they say, your time in the market is more important than timing the market. So, the longer the time spent in the market, that is, the longer you stay invested in the market, the higher would be your returns. This is especially true of the stock markets, where the risk is highest due to high levels of volatility, but the returns are commensurate with the risk only when the investment horizon is long enough to smoothen out the impact of volatility.

Besides, one needs to give enough time for your investment in stocks to bear fruits. The robust growth and sound fundamentals of a company will eventually reflect in the stock price of the company, but you need patience to reap the fruits of the company’s growth. The same is true of equity-oriented mutual funds, where the bouquet of equity stocks of companies operating in diverse sectors and industries will take time to generate wealth for the investor.