Investing Time Horizon

You’ve probably heard the advice that it’s important to match your investments to your time horizon. But what does that really mean?

Over the long run, stocks have historically performed better than other commonly used investments classes, so it can help to keep money that you don’t need for 10 years or longer primarily in stocks and stock mutual funds. But stocks are usually more volatile over the short run—if you need the money in the next few years, you may not have time to weather the market’s ups and downs. Instead, you may want to invest shorter-term money more conservatively. Your time horizon is basically how long you have until you’ll need to withdraw your money.

Most people have several different goals for their money: Your long-term goal may be a financially-secure retirement. You may be able to afford to invest that money more aggressively in stocks and stock mutual funds if you don’t plan to access that account for 10 years or more. Although you should keep in mind that time horizon is just one factor in selecting the level of stocks you should hold. Your investment goals, risk tolerance, other assets and income sources are some of the additional factors to consider. On the other hand, if you invest that money too conservatively—keeping it all in cash, for example, the value of your money might not keep up with inflation over the long term.

Even if most of that long-term money is in stock funds, you can typically help to lower your risk by diversifying your investments among several different types of companies—with some of the money in funds that focus on large companies, some on small companies, and some on international firms. You can also diversify by fund strategy, such as picking funds that focus on fast-growing companies and other funds that look for beaten-down stocks that seem poised for a rebound.

You may also have medium-term investing goals—if you’d like to save for a house down payment in five to 10 years, for example—and may want to invest that money in a portfolio that includes some stock funds as well as some fixed-income funds—although typically less in stocks than your longer-term investment portfolio. This portfolio should also be diversified.

And shorter-term goals—such as money you’ll need within the next two years—require investments that typically do not fluctuate widely over time, such as a certificate of deposit or stable-value fund, or other short maturity fixed income investment. It is important to note that any investment, including short-term fixed income investments, can lose money.

Your long-term goals will eventually become short-term goals through time, so it’s important to gradually shift your money to more conservative investments as your withdrawal date—and your time horizon—draws near.

Target-date funds, such as the Vantagepoint Milestone Funds,^1,2 are managed by investment professionals and were created specifically to match your investing time horizon. If an investor were to pick a fund that matches the date he expects to need the money—for example, the Milestone 2030 Fund if he plans to retire and begin a series of withdrawals in 2030—then he would be investing in a diversified portfolio of funds to match his investing time frame. The investments in this Fund would gradually adjust to become more conservative as his target withdrawal date approaches.

See the “Our Funds” section of www.icmarc.org for more information about the Vantagepoint Milestone Funds and other funds available in your retirement account.

¹Please be advised that with “Fund of Funds” arrangements, additional underlying fund fees will apply. Please consult the prospectus for details.

²Please consult both the current applicable prospectus and MAKING SOUND INVESTMENT DECISIONS: A Retirement Investment Guide carefully for a complete summary of all fees, expenses, charges, financial highlights, investment objectives, risks and performance information. Investing in mutual funds and other investment vehicles involves risk, including possible loss of the amount invested. Investors should consider the Fund's investment objectives, risks, charges and expenses before investing or sending money. The prospectus contains this and other information about the investment company. Please read the prospectus carefully before investing. All Vantagepoint Funds invested through 401 or 457 plans are held through VantageTrust. Vantagepoint Funds are distributed by ICMA-RC Services LLC, a wholly owned broker-dealer subsidiary of ICMA-RC and member FINRA/SIPC. For a current prospectus, contact ICMA-RC Services, LLC by calling 1-800-669-7400 (TDD: 1-800-669-7471) or writing to 777 North Capitol Street, NE, Washington, DC 20002-4240. You may also visit us on the Web at www.icmarc.org. Para asistencia en Español llame al 1-800-669-8216.