What does the term 'investment horizon' refer to?

The term 'investment horizon' specifically refers to the timeframe an investor plans to hold an investment before needing to access the funds or realize the gains. This concept is crucial in investment strategy, as it helps determine the types of investments that are appropriate for an investor's goals and risk tolerance. For example, a longer investment horizon typically allows for a greater focus on growth-oriented investments that may carry higher risk, while a shorter horizon might necessitate a more conservative approach that prioritizes capital preservation.

Understanding the investment horizon is essential for aligning an investor's asset allocation with their financial goals and timelines. The other options mentioned do not define the term accurately: the difference between short and long-term investments pertains more to categorization rather than the personal timeline; expected annual return relates to performance metrics; and risk associated with an investment concerns the volatility and potential loss rather than the timeframe for holding the investment.