Ch.12 · Model Portfolios and Asset Allocation · easy
What is the significance of an investor's 'investment horizon' in determining their risk profile?
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EXPLANATION
A longer investment horizon is a key component of risk capacity. With more time available, an investor can ride out market cycles and wait for equity markets to recover from downturns. This is why a 25-year-old saving for retirement can take significantly more equity risk than a 58-year-old approaching retirement.
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