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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

A backdoor Roth is a legal technique some high earners use to get Roth tax treatment by converting nondeductible IRA funds.