Horizon Analysis
Contents
Understanding Horizon Analysis: Evaluating Investment Performance Over Time
Exploring Horizon Analysis
Horizon analysis delves into projecting the discounted returns of a security or investment portfolio over various time frames, known as investment horizons. This analytical approach aids in assessing the performance of fixed income portfolios, enabling portfolio managers to make informed decisions.
Unraveling the Concept of Horizon Analysis
By employing scenario analysis, horizon analysis offers insights into the expected performance of fixed income securities based on factors like risk levels, interest rates, and market yields. Through this framework, portfolio managers can identify bonds that align with investors' goals and expected investment horizons, facilitating strategic portfolio construction.
Investing with Consideration for Time Horizon
Investors with longer time horizons can afford to take on more risk, allowing for greater exposure to equities. Conversely, as the investment horizon shortens, portfolios typically transition towards a more conservative allocation, prioritizing stability over high returns.
Exploring Related Concepts
Horizontal analysis, a counterpart used in financial statement analysis, compares historical data across accounting periods, providing further insights into investment decision-making.