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Question 18

Time horizon determines the appropriate vehicle for holding reserves. Goals or needs within a short timeframe (typically under three years) should prioritize capital preservation and easy access; longer horizons can tolerate market volatility for higher expected returns. That’s why cash, high-yield savings, and short-term CDs are common for short-term goals, while stocks and bond funds suit multi-year objectives. This question checks the basic rule-of-thumb linking horizon to vehicle choice.

For a financial goal you’ll need in less than three years, which place is usually best to hold the money?

Did You Also Know...

By Wise Wallet

Low expense ratios compound into materially larger ending balances over decades, so fees are one of the few things investors can control.