What Is Time Horizon?
How long you plan to hold an investment before you need the money.
The Full Definition
Time horizon is the length of time between now and when you'll actually need to spend the money you're investing. It's one of the most important factors in deciding how much risk to take — money you need in 2 years for a house down payment should be invested very differently than money you won't touch for 30 years in retirement. A longer time horizon gives a portfolio more room to recover from downturns, which is why younger investors are typically advised to hold more stocks.
Real-World Example
An investor with a 30-year time horizon can ride out a 2008-style 50% crash because there's decades for the market to recover. An investor with a 2-year time horizon for the same money could be forced to sell at a loss if the market drops right before they need the cash — which is why short time horizons call for safer assets like cash or short-term bonds.