Your time horizon is how long you can leave the money invested before you need to use it. This one idea influences how much risk you can reasonably take, which account to use, and which investments make sense for you as a Canadian.

3.1 Why Time Horizon Matters

The shorter your time horizon, the less risk you can afford; the longer your time horizon, the more ups and downs you can ride out. Markets don’t move in straight lines, and you don’t want to be forced to sell at a bad time just because you need cash.

Key ideas:

• Short horizon → prioritize safety and liquidity.
• Medium horizon → balance growth and safety.
• Long horizon → focus on growth and compounding, accept volatility.

You will likely have multiple horizons at once (e.g., vacation next year, house in 5 years, retirement in 30), and that’s normal.

3.2 Short Term (0–1 Year): When Not to Invest in Stocks

Short-term goals are usually under about a year:

• Examples: trip, small purchase, car repairs, upcoming tuition payment.
• Priority: the money must be there when you need it.

For this bucket, volatility is your enemy. If the market drops right before you need the cash, you may have to sell at a loss. That’s why most Canadian guidance recommends:

• Emergency fund and near-term goals in cash or very low-risk options (high-interest savings, money market funds, short-term GICs).

Short-term and emergency money:

• Protects your ability to leave long-term investments alone during downturns.
• Keeps you from panic-selling your TFSA/RRSP holdings when life happens.

Rule of thumb: