Is it time for investors to ditch the minimum five-year plan? Fink Money's DAVID BELLE has his say

David Belle is the founder of and a trader at Fink Money.

When it comes to investing, financial advisers often recommend a minimum time frame of five years.

This conventional investment wisdom is based on the idea that longer-term investments tend to deliver higher returns while smoothing out short-term market ups and downs.

Historically, this approach has merit: over extended periods, markets generally trend upward, rewarding patience with growth.

However, this one-size-fits-all advice isn’t always the best fit for investors.

By sticking rigidly to a five-year minimum, investors will often miss out on shorter-term opportunities that could offer significant gains or better align with their financial needs.

This issue can be framed as an ‘opportunity cost’ problem, where the potential benefits of alternative investment choices are sacrificed for the sake of a long-term strategy.

New thinking required? A one-size-fits-all approach isn't always the best fit for investors

Opportunity cost is a basic idea in economics that when you choose one option, you give up the potential benefits of the alternatives.

In investing, if you commit your money to a five-year plan, the opportunity cost is the profit or flexibility you lose by not pursuing shorter-term investments instead.

Long-term strategies can offer stability and growth, but they tie up your funds — potentially keeping you from jumping on market trends or unique opportunities that don’t fit the traditional five-year mould.

For starters, advisers aren’t wrong to suggest a 5-year horizon—there’s hard logic behind it.

Firstly, as we’ve seen since Trump announced his tariffs, markets can be a rollercoaster in the short term.

Stocks might drop suddenly, and if you need to cash out during a dip, you could lose money.

A five-year window gives investments time to recover and grow, lowering the chance of selling at a bad moment.

Secondly, there’s the magic of compounding where, over time, your returns can earn returns of their own.

The longer you stay invested, the more this effect kicks in. Third, there’s no doubt that short-term market swings can spook investors into rash moves, like selling low after a crash.

A longer time frame, by contrast, encourages you to ride out the storm rather than panic.

Fourth, some investments — like certain mutual funds or bonds — charge you for pulling out early.

Advisers might suggest five-year time frames to dodge those costs. All these points make sense for a long-term approach, but not every investor’s situation fits neatly into this box.

The hidden cost of longer investment timeframes

By locking your money into a five-year plan, you might miss shorter-term opportunities that could pay off faster or suit your goals better.

For example, some industries explode with growth over a short period. Think AI and renewable energy.

Thinking ahead: David Belle is the founder of Fink Money

If you spotted the rise of electric vehicles early, investing in a company like Tesla or a related start-up could have brought big returns in just a couple of years.

But if your money was tied up in a diversified five-year portfolio, you may have missed that window. Sector booms don’t always need five years to play out and waiting that long could mean missing the peak entirely.

Also, markets don’t always move slowly. A market correction — when stock prices drop 10 per cent or more — can be a golden chance to buy low.

Look at the Covid-19 crash in March 2020: stocks tanked as the pandemic hit but many bounced back within months. Investors with cash on hand scooped up bargains and saw gains by the end of the year.

If your funds were stuck in a five-year investment, the opportunity cost was the chance to profit from that rapid recovery.

Then there’s the fact that most people’s lives don’t always follow a five-year schedule.

Maybe you’re saving for a house deposit in two years or your children’s university fees in three.

Tying up your money for five years could leave you scrambling when those deadlines hit. It blocks you from meeting real-world needs.

Meanwhile, some investments — like initial public offerings (IPOs) or venture capital — can skyrocket in value fast.

When Airbnb went public in December 2020, its stock nearly doubled on the first day. Investors who got in early made a killing in weeks, not years.

But if you’re locked into a long-term plan, the opportunity cost is the chance to cash in on a quick win.

Financial advisers can deliver real value for certain investors, but it’s important people are aware that their old school, conventional advice can amplify opportunity cost issues — and cause some investors to lose out.

Advisers may also be incentivised by longer term time frames. Some will earn a percentage of your assets under management (AUM) or commissions on products like mutual funds.

The longer your money stays invested, the more they make. A five-year lock-in keeps their income steady, even if it’s not ideal for you.

Advisers certainly aren’t villains, they’re often just following what’s worked historically.

But their generic approach can blind them to shorter-term possibilities that may suit you better.

What I’m categorically not saying is that people should ditch long-term investing entirely.

Instead, they should implement a strategy that has some flexibility built in, one that bends to their needs and reacts to the markets.

To this end, people should review their investments every few months rather every year.

Are there new trends or personal goals to adjust for? Staying proactive keeps you ready for change.

While it’s important to put some money in long-term assets for stability, consider keeping a chunk in shorter-term options — like treasury bills or cash accounts — for quick moves. Maybe 70 per cent long-term, 30 per cent short-term, depending on your risk profile.

Also, be sure to line up your investments with when you’ll need the money.

Short-term goals get short-term strategies; long-term goals like retirement can handle the five-year stretch.

Finally, don’t rely on one adviser. Talk to others with different specialties to spot opportunities your main adviser might miss.

Many will argue that shorter-term investing is too risky, as markets are unpredictable and jumping in and out can backfire.

They’re not wrong: timing the market is tough and frequent trades can rack up costs or taxes. But not all short-term options are wild gambles.

Short-term bonds or CDs (Certificates of Deposit) offer steady returns with low risk. Plus, with research and a robust plan, you can cut down on reckless moves.

The real risk might be sticking to a five-year plan that doesn’t fit your life.

The financial world isn’t what it was decades ago. Technology, global events and instant information mean opportunities pop up — and vanish — faster than ever.

A five-year horizon made sense when markets were slower, but these days, agility matters.

A mix of short- and long-term investments can keep you sane and in the game.

To wrap up, while a five-year timeframe has its benefits — less risk, steady growth — it’s not perfect.

The opportunity cost can be missing a tech boom or a market rebound.

Advisers mean well, but their long-term bias or incentives can keep you from exploring all your options.

Instead of blindly following the five-year rule, aim for a strategy that flexes with your goals and the market.

Check your portfolio often, blend short- and long-term investments, and don’t be afraid to shop around for advice.

That way, you’re not just playing it safe, you’re playing it smart, balancing stability with the chance to seize the moment.