Time horizon is the length of time before an investor needs to draw on the money. It is the single largest input to risk capacity, because recovery from a loss requires time that cannot be created later.
A decline is survivable in proportion to the time available to recover from it. Time is the one input an investor cannot manufacture after the fact, which is what makes it the primary driver of risk capacity.
A single number is usually wrong. School fees in four years, a house deposit in eight, and retirement in twenty-five are three different horizons and imply three different risk profiles.
Averaging them into one produces a portfolio that is too aggressive for the near obligation and too conservative for the distant one.
A common error is treating the retirement date as the horizon. Money drawn at eighty-five has a horizon that extends decades past the day someone stops working.
What changes at retirement is that withdrawals begin, which introduces sequence-of-returns risk rather than ending the investment period.
A goal with a movable date has a longer effective horizon than a fixed one. That flexibility is a genuine risk asset and is frequently left out of the analysis.
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