Your client Gerard is 30 years old and plans to retire at age 65. He has a mutual fund portfolio of $40,000 in which he invests $1,500 monthly. Gerard's objective is to use these funds to meet the 20% down payment requirement to buy a house for $650,000. What is Gerard's investment time horizon not considering market fluctuations?

The investment time horizon is the period over which an investor plans to save for a specific goal. Gerard's goal is the down payment, not retirement. First, calculate the target down payment: 20% of $650,000 = $130,000. Next, determine the amount still needed: $130,000 (target) - $40,000 (current savings) = $90,000. Finally, calculate the time to save this amount with his monthly contributions, ignoring market fluctuations: $90,000 / $1,500 per month = 60 months. Converting months to years: 60 months / 12 months per year = 5 years. Gerard's retirement age is irrelevant to this specific goal.

B. 15 years is an incorrect calculation; it would take 10 years to save $180,000 ($1,500 x 12 x 10), far more than needed.
C. 25 years is an incorrect calculation and closer to his retirement horizon, which is not the goal in question.
D. 35 years is Gerard's time horizon for retirement (age 65 - 30), not for his down payment goal.

1. IFSE Institute, Canadian Investment Funds Course (CIFC), Part 1, Module 2, Chapter 4: The Financial Planning Process, Section 4.2 "Determining Investment Objectives and Constraints". This section emphasizes defining the time horizon based on specific financial goals.

2. Mayo, H. B. (2016). Investments: An Introduction (12th ed.). Cengage Learning. Chapter 1: An Introduction to Investments, discusses the importance of matching investment strategies to the investor's time horizon for specific goals.