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Before You Start Investing: Know Your Investment Horizon — Short-Term Investment Horizon
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Short-Term Investment Horizon

Short-Term Investment Horizon

Short-term investments are investments you expect to hold for a short period of time and convert to cash when the time is right. A short investment horizon usually doesn’t exceed a period of three years.

For investors who wish to make a quick profit in a shorter period of time knowing when to sell a stock depends on your personal investment goals.

A short-term goal is something you want to accomplish in the near future: today, this week, this month, this year or in a couple of years. For example, you may have bought a stock because you expect the price to increase by 10% in the next year. Once you achieve that goal, you would sell the stock.

A short investment time frame may also be a good choice if you’re strongly risk-averse or need to access a significant amount of cash in the near future. That said, short-term investors need to be careful to avoid riskier investments so that they don’t incur significant losses. This is particularly true when it comes to investing in companies that are already close to the maturity stage of their business life cycle. We'll speak about the business cycle in our further chapters.

“Time flies. It’s up to you to be the navigator.” — Robert Orben.


Let’s say your investment horizon is one year (short term), and you want to limit your loss to 10%. You bought the Ebay stock at $40.9 days later, the Ebay stock declined by 8%. What should you do? Why?

0/23 (0%) Correct
  • 1
    Keep! Analysts on the internet say so.
  • 2
    Sell! That is an 8% drop in price!
  • 3
    Keep! That is only an 8% drop, but if it drops past 10% I’ll sell.
  • 4
    Keep! The fundamental and earning reports look good, even if it drops past 10%.
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