The investment period is one of the key parameters of ready-made investment solutions. Their results largely depend on it. How exactly the duration of the instrument affects its characteristics, we will tell you in this article.

Let’s look at the established experience
Until recently, many investors chose investments for a period of no more than one year. But since the investment culture is more developed abroad, maybe they are right to choose investments for a long period of time? How are “long” products superior to “short” products? One might assume higher returns, but this is not always the case.

The difference in returns between “short” and “long” products
Often an investor comes just to “try”, and therefore wants to sign up for a short term product. But it is important to remember that when investing, potential returns grow in proportion to time, while risk grows in proportion to the square root of time, i.e. slower.

Thus, the shorter the horizon, the more significant the impact of risk compared to return, and vice versa: the longer the investment time, the more the potential return prevails over risk.

If you invest, conventionally, for one day, the expected return will be close to zero, since one-day market movements up or down are essentially equal in probability
Therefore, when an investor plans for a short term and has no protection, the risk-return ratio is not in his favor. Certainly, he may make money. But there is a high risk that he will lose.