Time Horizon Suitability

The characteristics of a particular investment should be suitable given the client’s stated time horizon. Mutual funds are generally considered medium to long term investments.

A client’s stated time horizon is most important when considering the fee structure of a mutual fund. Generally, it is considered unsuitable for a client to be put into a DSC fee fund and have a time horizon that is shorter than the DSC schedule, and, at a minimum, a client’s time horizon should never be 3 years or less if DSC fee funds are purchased. A time horizon suitability analysis of investments with liquidity restrictions should also be performed. If the stated time horizon is less than the liquidity restrictions, the investment is not suitable for the client.