Time Horizon
How long money can stay invested before it is needed. It is the single strongest guide to which asset a goal belongs in.
A long horizon can wait for assets to recover after a downturn, which buys the right to hold riskier, higher returning assets. A short horizon may force a sale during a dip, so it belongs in safer assets.
Often Confused With
- Risk Tolerance
- Risk tolerance is how much loss a person can stand; time horizon is how long the money can be left alone.
Taught In
See Also
5.3.C.1 · 5.3.C.2