What is horizon risk?
Horizon risk refers to the financial uncertainty or danger that an investor’s planned investment time horizon may be unexpectedly shortened due to unforeseen personal or economic events. Examples of such events include sudden job loss, unexpected medical emergencies, or the need to fund urgent expenses that force the investor to liquidate their assets before they have reached their target maturity. Because many long-term investment strategies—such as stock market portfolios or growth-oriented funds—rely on a specific duration to ride out short-term market volatility and benefit from compounding, horizon risk creates the danger of being forced to exit an investment during a market downturn, thereby locking in losses or failing to achieve the desired return on investment.
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