Asset allocation should be based on investment time horizon from "summary" of All About Asset Allocation, Second Edition by Richard Ferri
When constructing an investment portfolio, it is essential to consider the time horizon for which the funds will be invested. Asset allocation should be determined based on this crucial factor. The investment time horizon refers to the length of time an investor expects to hold an investment before needing to access the funds. It can range from short-term (less than one year) to long-term (10 years or more). Short-term investors, with a time horizon of less than one year, should focus on preserving capital and maintaining liquidity. Therefore, their asset allocation should be weighted towards low-risk investments such as cash and short-term bonds. This approach helps minimize the impact of market volatility and ensures that the funds are readily available when neede...
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