I’ve always believed that most investment questions can be answered by asking one simple question:

“When do you need your money?”

The traditional way of looking at investing has been purely from a risk tolerance perspective. Questions like:

• How would you react if your investment lost 20% in a year?
• What is a comfortable amount of stocks for you?
• How much risk do you desire overall?

And to be fair, these are incredibly important questions to address.

But as we meet with more people who’ve worked with robo advisors or traditional advisors using a standard risk tolerance questionnaire, we see a common trait:

Far too many are being too conservative.

Far too few are taking enough risk.

Once we review these accounts, clients often mention that what they had was the “most aggressive” they were offered or that they simply didn’t know how to change their portfolio once it was set.

This is why looking at investments from a time horizon perspective is usually a more practical way to allocate money. To understanding this in a simple manner, let's compare two completely different assets: stocks and cash. Data shows us an interesting relationship between cash and stocks.

Cash has the following attributes:

• Does not fluctuate with the stock market
• Generally does not lose principal
• Can accrue some interest

But on the other hand:

• Historically underperforms inflation
• Completely lags compared to most investments
• Misses out on long-term compounding

Stocks, on the other hand, bring different attributes:

• Have been strong performers historically
• Have outpaced inflation and cash
• Have become a reliable way of creating wealth

But:

• They are volatile
• There’s no guarantee of principal
• They carry high risk in the short term

When we look at stocks through a 1-year lens, the results can swing wildly. In any given year, the S&P 500 has delivered returns ranging from –40% to +50%. That’s the nature of short-term investing. Unpredictable and often uncomfortable.

But stretch that lens to 10 years, and the story changes. As of August 31, 2025, the 10-year annualized rolling return for the S&P 500 (via SPY ETF) is ~14.50%. Over longer horizons, the ups and downs smooth out, and the probability of positive returns rises significantly.

Source: Lazy Portfolio ETF – SPY Rolling Returns (Note: Past performance does not guarantee future results)

That’s the power of compounding over decades, but also a reminder that in any single year, stocks can swing dramatically in either direction.

Now, there are many investments in between, such as real estate, bonds, commodities, and more. Each one has its own risks tied to markets, inflation, and interest rates.

The mistake people make isn’t necessarily the investments themselves. It's a mismatch of the risk with the time horizon.

Example #1: Short-Term Goal

Suppose you want to buy your first home. You’ve saved $200,000 for a 20% down payment on a $1 million home. You’ve hit your goal.

Now you face the real question:

“What is my top priority: growing this money or preserving it?”

The answer is preserving it. You’re not concerned with squeezing out a few extra dollars. You’re concerned with making sure that $200,000 is ready when you need it.

So your decision becomes:
Do I put this money in something that could grow but fluctuate or in something stable that won’t change in the short run?

Pretty common sense, right? The last thing you want is for the market to dip right before closing and suddenly leave you short.

When you need money in the near term, your priority is safety and preservation.

Example #2: Long-Term Goal

Now let’s flip it. Imagine you’re saving for retirement, and you won’t need the money for 10+ years.

If you kept all of it in cash, you’d avoid volatility, but you’d also fall behind inflation and miss out on decades of growth.

So you come across the question again:

What is my top priority: growing or preservation?

In this case, we want growth. Time allows your portfolio to ride out short-term swings and benefit from long-term compounding. As we saw in the data, stocks have historically a much higher chance losing money near term than it does long term.

The point is simple: don’t just fill out a questionnaire and call it a day.

You never know if those results actually line up with your goals. Instead, put more emphasis on intention.

How is my money not just growing for me, but working in line with my goals?

When you need your money, it really does make all the difference.

- Max​

Need help with your financial planning? I'm currently only taking 1 more client for 2025 until the new year. If you want to take a look at your situation, Book a call here.

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