Short/Mid?Long Term Investment Horizons

[ENP]

After how many years is it better to switch from term deposits into shares?

5 years, 7, 10+, other?

Basically, after what time frame does it make sense to move from the safety of a term deposit with lower returns to move into the more volatile sharemarket with higher long term returns?

This for example is if me or you need X amount of dollars, X amount of years from today.

[shasta]

After how many years is it better to switch from term deposits into shares?

5 years, 7, 10+, other?

Basically, after what time frame does it make sense to move from the safety of a term deposit with lower returns to move into the more volatile sharemarket with higher long term returns?

This for example is if me or you need X amount of dollars, X amount of years from today.

You would do better to follow the economic cycle, i think that's what you were getting at?

At the moment interest rates are low, so for the conservative investor bonds offer better returns, whilst the sharemarket is bullish (ie trending up) you would expect even better returns for those with more risk tolerance.

Of course down the track when the NZ economy picks up, wages go up, & inflationary starts, interest rates will follow suit.

At some point the market will become overheated & trend back down, where the returns from fixed interest securities/term deposits will outperform returns from the market.

ENP - I remember reading some of your posts suggesting you were young & were in the kiwisaver scheme.

I assume you went for a growth type fund?

Many younger/first time investors can get caught up chasing multi-bagger spec shares (or pennydreadfuls, particularly in the resource sector), so the tendency is to go for more risk v reward.

It's kind of refreshing to see someone so young actually think about there risk tolerance, & ask such valid questions!

[ENP]

Yes, I'm in the Gareth Mogan Growth Kiwisaver fund.

But I'm just thinking about where I should park other savings/investments for saving up for a house (about 7-10 year time frame I'm hoping, after OE, travel, etc, etc.)

[shasta]

Yes, I'm in the Gareth Mogan Growth Kiwisaver fund.

But I'm just thinking about where I should park other savings/investments for saving up for a house (about 7-10 year time frame I'm hoping, after OE, travel, etc, etc.)

Historically shares have outperformed other investment types, so over the next 7 - 10 years, i'd expect the sharemarket to outperform fixed interest returns.

I'm referring to the ASX in particular, where there is far more liquidity than the smaller NZX market. (I haven't invested in other share markets)

It's hard to pick individual stocks this far out, but 3 areas you might want to look into are: Healthcare, Energy, Alternative Energy.

You can invest in those indexes, rather than individual stocks via the ASX

[ENP]

So maybe just an index type fund then?

[shasta]

So maybe just an index type fund then?

If you're comfortable with a less hands on approach, & don't want to cherry pick individula stocks, then it's an option for you.

All depends on what risk v return you are after, & how much time & effort/research you want to put into it.

An index paying dividends, or offering a dividend reinvestment program can accumulate a tidy sum over 7 - 10 years ;)

[ENP]

If you're comfortable with a less hands on approach, & don't want to cherry pick individula stocks, then it's an option for you.

All depends on what risk v return you are after, & how much time & effort/research you want to put into it.

An index paying dividends, or offering a dividend reinvestment program can accumulate a tidy sum over 7 - 10 years ;)

So over the 7 year time frame, it's a decent bet that the stock type investment will out-perform a term deposit investment?

[shasta]

So over the 7 year time frame, it's a decent bet that the stock type investment will out-perform a term deposit investment?

That's my opinion, Yes :D

[ENP]

That's my opinion, Yes :D

Cheers, thanks for that.