Skip to Main Content
HBS Online
  • Courses
    Open Courses Mega Menu
    • Business Essentials
      • Credential of Readiness (CORe)
      • Business Analytics
      • Economics for Managers
      • Financial Accounting
    • Leadership & Management
      • Leadership Principles
      • Management Essentials
      • Negotiation Mastery
      • Organizational Leadership
      • Strategy Execution
      • Power and Influence for Positive Impact
      • Leadership, Ethics, and Corporate Accountability
    • Entrepreneurship & Innovation
      • Entrepreneurship Essentials
      • Disruptive Strategy
      • Negotiation Mastery
      • Design Thinking and Innovation
      • Launching Tech Ventures
    • Strategy
      • Strategy Execution
      • Business Strategy
      • Economics for Managers
      • Disruptive Strategy
      • Global Business
      • Sustainable Business Strategy
    • Finance & Accounting
      • Financial Accounting
      • Leading with Finance
      • Alternative Investments
      • Sustainable Investing
    • Business in Society
      • Sustainable Business Strategy
      • Global Business
      • Sustainable Investing
      • Power and Influence for Positive Impact
      • Leadership, Ethics, and Corporate Accountability
    • All Courses
  • For Organizations
    Open For Organizations Mega Menu
    • Corporate Learning
      Help your employees master essential business concepts, improve effectiveness, and expand leadership capabilities.
    • Academic Solutions
      Integrate HBS Online courses into your curriculum to support programs and create unique educational opportunities.
    • Need Help?
      • Frequently Asked Questions
      • Contact Us
    • Black, Latinx, and underrepresented minority professionals
      Pathways to Business

      Stories designed to inspire future business leaders.

  • Insights
    Open Insights Mega Menu
    • Business Insights Blog
      • Career Development
      • Communication
      • Decision-Making
      • Earning Your MBA
      • Entrepreneurship & Innovation
      • Finance
      • Leadership
      • Management
      • Negotiation
      • Strategy
    • All Topics
    • Sample Business Lessons and E-Books

      Gain new insights and knowledge from leading faculty and industry experts.

    • Free Guide

      Learn how to formulate a successful business strategy.

  • More Info
    Open More Info Mega Menu
    • Learning Experience
      Master real-world business skills with our immersive platform and engaged community.
    • Certificates, Credentials, & Credits
      Learn how completing courses can boost your resume and move your career forward.
    • Learning Tracks
      Take your career to the next level with this specialization.
    • Financing & Policies
      • Employer Reimbursement
      • Payment & Financial Aid
      • Policies
    • Connect
      • Student Stories
      • Community
    • Need Help?
      • Frequently Asked Questions
      • Request Information
      • Support Portal
    • Apply Now
Login
My Courses
Access your courses and engage with your peers
My Account
Manage your account, applications, and payments.
HBS Home
  • About HBS
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
HBS Online
  • Courses
  • Business Essentials
  • Leadership & Management
  • Entrepreneurship & Innovation
  • Strategy
  • Finance & Accounting
  • Business in Society
  • For Organizations
  • Insights
  • More Info
  • About
  • Support Portal
  • Media Coverage
  • Founding Donors
  • Leadership Team
  • Careers
  • My Courses
  • My Account
  • Apply Now
  • …→
  • Harvard Business School→
  • HBS Online→
  • Business Insights→

Business Insights

Harvard Business School Online's Business Insights Blog provides the career insights you need to achieve your goals and gain confidence in your business skills.

 
Filter Results Arrow Down Arrow Up

Topics

Topics

  • Accounting
  • Analytics
  • Business Essentials
  • Business in Society
  • Career Development
  • Communication
  • Community
  • ConneXt
  • Decision-Making
  • Earning Your MBA
  • Entrepreneurship & Innovation
  • Finance
  • Leadership
  • Management
  • Marketing
  • Negotiation
  • News & Events
  • Productivity
  • Staff Spotlight
  • Strategy
  • Student Profiles
  • Technology
  • Work-Life Balance

Courses

Courses

  • Alternative Investments
  • Business Analytics
  • Business Strategy
  • CORe
  • Design Thinking and Innovation
  • Disruptive Strategy
  • Economics for Managers
  • Entrepreneurship Essentials
  • Financial Accounting
  • Global Business
  • Launching Tech Ventures
  • Leadership Principles
  • Leadership, Ethics, and Corporate Accountability
  • Leading with Finance
  • Management Essentials
  • Negotiation Mastery
  • Organizational Leadership
  • Power and Influence for Positive Impact
  • Strategy Execution
  • Sustainable Business Strategy
  • Sustainable Investing
Subscribe to the Blog
*
Please complete this required field.
Email must be formatted correctly.
Please complete all required fields.
RSS feed

Filters

Topics

Topics

  • Accounting
  • Analytics
  • Business Essentials
  • Business in Society
  • Career Development
  • Communication
  • Community
  • ConneXt
  • Decision-Making
  • Earning Your MBA
  • Entrepreneurship & Innovation
  • Finance
  • Leadership
  • Management
  • Marketing
  • Negotiation
  • News & Events
  • Productivity
  • Staff Spotlight
  • Strategy
  • Student Profiles
  • Technology
  • Work-Life Balance

Courses

Courses

  • Alternative Investments
  • Business Analytics
  • Business Strategy
  • CORe
  • Design Thinking and Innovation
  • Disruptive Strategy
  • Economics for Managers
  • Entrepreneurship Essentials
  • Financial Accounting
  • Global Business
  • Launching Tech Ventures
  • Leadership Principles
  • Leadership, Ethics, and Corporate Accountability
  • Leading with Finance
  • Management Essentials
  • Negotiation Mastery
  • Organizational Leadership
  • Power and Influence for Positive Impact
  • Strategy Execution
  • Sustainable Business Strategy
  • Sustainable Investing
Subscribe to the Blog
*
Please complete this required field.
Email must be formatted correctly.
Please complete all required fields.
RSS feed

Understanding Time Horizons of Alternative Investments

Business professional considering investment time horizon
  • 29 Jul 2021
Natalie Chladek Author Staff
tag
  • Alternative Investments
  • Finance

There are several factors to consider when evaluating investment opportunities, such as volatility, expected returns, and risk tolerance. Another critical factor is time horizon. An investment’s time horizon, or longevity, can vary depending on the type of investment and the investor’s goals. It’s arguably the most important factor to take into account: For an investment to be successful, your strategy must allow you to access your money when you need it, however soon or far out that may be.

What Is an Investment Time Horizon?

An investment time horizon is how long an investor expects to own a particular security, or investment. Time horizons vary for different investment strategies—from a few days or hours to potentially decades.

Generally, a longer time horizon is more conducive to a riskier investment or set of investments, as it allows more time for the market to recover from any setbacks and for the investor to realize a gain. Investing, at its core, is a balance of risk and reward—you can forgo having access to cash for a certain amount of time with the expectation that it will later be returned to you with a premium for giving it up. Usually, the longer you give up your cash, the more you can expect to earn back.

Learn more about HBS Online's Alternative Investments course.

Types of Investment Time Horizons

Time horizons vary and are often dictated by investment goals or strategies, which are closely related to liquidity. At the end of an investment’s time horizon, it’s fully liquid, or able to be cashed out or traded. Prior to an investment’s maturity, it’s illiquid, or unable to be accessed by the investor. Investors factor in liquidity when choosing which investments best suit their time horizon goals.

For retail or individual investors, time horizons can be dictated by a particular savings goal, such as retirement or purchasing a home. Institutional investors, however, are generally long-term investors, as organizations like pensions or endowments exist to provide returns for decades, if not indefinitely.

The structure of an investment makes it suited for different longevities, and trying to cut it short or extend its length can result in subpar performance. Additionally, there’s an opportunity cost: Not maximizing one investment might mean you could have better invested your money elsewhere.

The simplest investments with regard to time horizons have preset maturity dates. Bonds, for example, are designed to mature on a certain date, and investors purchase them knowing the exact date their money will be returned.

Other types of investments, however, can be more complicated. For example, when you purchase a stock, you can turn around and sell it at any time. But the stock market fluctuates constantly, so how do you know if you want to sell your stock the next day or the next year? These determinations depend on various factors, including when you need your money back and how you expect the market to perform in the future.

What Do Time Horizons Mean For Alternative Investments?

Alternative investments are generally much more illiquid than traditional investments, which means they’re only suitable for investors willing to invest cash over a long period.

For example, venture capital funds typically last for approximately 10 years. Investors commit a certain amount of money to a venture capital firm that invests it over the next decade, along with other contributors to the fund. While investors may receive payouts during that period—depending on the fund’s exit events—they enter the fund understanding they may not have access to investments for several years.

Real estate is another type of alternative investment that requires an investment strategy with longer time horizons. Historically, real estate has offered valuable opportunities for those willing to wait for hot market conditions. One only needs to look at the soaring price of housing in the United States during recovery from the coronavirus (COVID-19) pandemic to realize there’s money to be made by selling a house in 2021 versus 2019. The same holds true for institutional investors that, on average, hold real estate investments for an average of 7.6 years.

There are many elements of real estate that prevent it from being a quick turnaround investment, such as complicated financing or years-long lease terms. For these reasons, only investors with longer time horizons should consider adding real estate investments to their portfolios.

How Alternatives Differ From Traditional Investments

It’s important to note that traditional investments, too, can be advantageous for investors with longer time horizons. For example, one could simply purchase a stock and hold on to it for decades. The difference with stocks, however, is that the investment is much more liquid because the investor could choose to sell the stock for cash at any time. In the case of alternatives, this option might not exist.

Using Alternatives to Serve Longer Investment Time Horizons

There are many factors to consider when thinking about investment time horizons, including your age, liquidity needs, upcoming life events (such as retirement or buying a home), or the goals and needs of clients and partners (if you’re an institutional investor). For those with longer time horizons, alternatives offer a promising way to diversify portfolios, as the concession of giving up access to cash in the short run can result in higher returns in the long run.

Make and communicate better financial decisions | Explore Our Certificate Courses

The Importance of Investment Time Horizons

While investments can be measured in many ways, they cannot enhance your portfolio unless they provide access to your money when you need it; understanding time horizons is crucial to ensuring success. To learn more about how alternatives differ from traditional investments and the unique advantages they offer, consider taking an alternative investments course to learn strategies for building and diversifying portfolios.

Are you interested in expanding your knowledge of alternative investments? Explore our five-week online course Alternative Investments and other finance and accounting courses.

About the Author

Natalie is an Associate Product Manager at Harvard Business School Online working on Alternative Investments, Leading with Finance, Negotiation Mastery, and Sustainable Business Strategy. She received her B.A. and M.A. from Stanford University and M.B.A. from UCLA Anderson. In her free time, she enjoys running, cooking, and staying up too late rooting for her Bay Area sports teams.
 
All FAQs

Top FAQs

How are HBS Online courses delivered?

+–

We offer self-paced programs (with weekly deadlines) on the HBS Online course platform.

Our platform features short, highly produced videos of HBS faculty and guest business experts, interactive graphs and exercises, cold calls to keep you engaged, and opportunities to contribute to a vibrant online community.

Are HBS Online programs available in languages other than English?

+–

We expect to offer our courses in additional languages in the future but, at this time, HBS Online can only be provided in English.

All course content is delivered in written English. Closed captioning in English is available for all videos. There are no live interactions during the course that requires the learner to speak English. Written English proficiency should suffice.

Do I need to come to campus to participate in HBS Online programs?

+–

No, all of our programs are 100 percent online, and available to participants regardless of their location.

How do I enroll in a course?

+–

All programs require the completion of a brief application. The applications vary slightly from program to program, but all ask for some personal background information. You can apply for and enroll in programs here. If you are new to HBS Online, you will be required to set up an account before starting an application for the program of your choice.

Our easy online application is free, and no special documentation is required. All applicants must be at least 18 years of age, proficient in English, and committed to learning and engaging with fellow participants throughout the program.

After submitting your application, you should receive an email confirmation from HBS Online. If you do not receive this email, please check your junk email folders and double-check your account to make sure the application was successfully submitted.

Updates to your application and enrollment status will be shown on your Dashboard. We confirm enrollment eligibility within one week of your application.

Does Harvard Business School Online offer an online MBA?

+–

No, Harvard Business School Online offers business certificate programs.

What are my payment options?

+–

We accept payments via credit card, wire transfer, Western Union, and (when available) bank loan. Some candidates may qualify for scholarships or financial aid, which will be credited against the Program Fee once eligibility is determined. Please refer to the Payment & Financial Aid page for further information.

We also allow you to split your payment across 2 separate credit card transactions or send a payment link email to another person on your behalf. If splitting your payment into 2 transactions, a minimum payment of $350 is required for the first transaction.

In all cases, net Program Fees must be paid in full (in US Dollars) to complete registration.

What are the policies for refunds and deferrals?

+–

After enrolling in a program, you may request a withdrawal with refund (minus a $100 nonrefundable enrollment fee) up until 24 hours after the start of your program. Please review the Program Policies page for more details on refunds and deferrals. If your employer has contracted with HBS Online for participation in a program, or if you elect to enroll in the undergraduate credit option of the Credential of Readiness (CORe) program, note that policies for these options may differ.

 

Sign up for News & Announcements


  • • Please complete this required field.
  • • Email must be formatted correctly.
  • • Please complete all required fields.

Subject Areas

  • Business Essentials
  • Leadership & Management
  • Entrepreneurship & Innovation
  • Strategy
  • Finance & Accounting
  • Business & Society

Quick Links

  • FAQs
  • Contact Us
  • Request Info
  • Apply Now
  • Support Portal

About

  • About Us
  • Media Coverage
  • Founding Donors
  • Leadership Team
  • Careers @ HBS Online

Legal

  • Legal
  • Policies
Harvard Business School
Copyright © President & Fellows of Harvard College
  • Site Map
  • Trademark Notice
  • Digital Accessibility