Horizon Analysis

Horizon analysis is a financial planning tool that helps investors understand the potential long-term growth of an investment. It is a type of scenario analysis that projects future cash flows and returns over a number of years.

Horizon analysis can be used to compare different investment options and to make decisions about how to allocate capital. It can also be used to assess the risk of an investment and to determine how it might perform under different economic conditions.

To perform a horizon analysis, an investor will need to make a number of assumptions about the future, such as the rate of inflation, interest rates, and economic growth. They will also need to estimate the future cash flows from the investment.

Once these assumptions have been made, the investor can use a financial calculator or spreadsheet to project the future value of the investment. The results of the horizon analysis will provide the investor with a better understanding of the potential long-term growth of the investment and the risks involved.

Horizon analysis is a valuable tool for investors who are looking to make long-term investment decisions. It can help them to identify the best investment options and to make informed decisions about how to allocate their capital.

Here are some of the benefits of using horizon analysis:

* It can help investors to understand the potential long-term growth of an investment.
* It can be used to compare different investment options.
* It can help investors to assess the risk of an investment.
* It can be used to determine how an investment might perform under different economic conditions.

Horizon analysis is a relatively simple tool to use, but it can provide investors with valuable insights into the potential long-term performance of their investments.