Glossary
Time Horizon
A time horizon is the length of time before invested money will actually be needed and spent.
Horizon, more than anything else, determines what an investment can safely be asked to do. Money needed within a few years cannot ride out a bear market and belongs in cash-like holdings; money needed in twenty-five years can — and its greater enemy is inflation, which stocks have historically outrun.
Why it matters in practice
Most portfolios serve several horizons at once — an emergency fund (immediate), a house down payment (years), retirement (decades) — and mismatches cause predictable damage in both directions: short-term money in stocks gets sold at a loss when the need arrives in a downturn, while long-term money in cash quietly loses purchasing power for decades. Retirement's horizon is also longer than intuition suggests: it ends at the end of retirement, not the start, often 30+ years after the last paycheck.
Related terms: Risk Tolerance · Asset Allocation · Liquidity · Inflation · Longevity Risk