Unit 1 · Level 3 · Goals & horizons
Assets meet horizons
Assets have personalities. Cash and money-market funds are calm but barely grow. Bonds wobble a little and pay steady interest. Stocks can double over a decade or drop 40% in a bad year. There is no 'best' asset here, only a good match between an asset's mood swings and how long the money can sit still.
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What you get asked
Match each pot of money to a sensible home
The longer the horizon, the more short-term wobble you can afford in exchange for growth. Short horizons buy stability; long horizons buy growth.
Why can a 30-year horizon hold mostly stocks despite crashes?
The S&P 500 fell about 57% in 2008-09, yet regained its peak within roughly five years. Time is the ingredient that turns stock volatility from a threat into noise. Never a guarantee, but a strong tailwind.
As a goal gets closer, most plans gradually shift money from stocks toward ___ to lock in progress.
This is called de-risking: a goal two years out can't survive a 30% drawdown, so the mix gets calmer as the date approaches.
Sara keeps her 25-year retirement pot entirely in a savings account 'to be safe'. What's the hidden risk?
At 2-3% inflation, cash loses roughly half its buying power over 25-30 years. For long horizons, 'too safe' is its own kind of risky. That was the League 1 melting-ice lesson.
What single question does this whole lesson boil down to?
Horizon first, asset second. Get that order right and most of the scary decisions answer themselves. 🐜
The rest of this unit
Before you pick a single fund, decide what the money is FOR and when you'll need it.