If you know you’ll need your funds within the next five years, on the other hand, you can’t afford to take as much risk.
Similarly, the more time you have to reach a goal, the higher your risk capacity may be because you’ll be able to wait out any market downturns. If you know you’ll need your funds within the next five years, on the other hand, you can’t afford to take as much risk. This is because you won’t be able to wait for your money to recover from a market downturn if one happens between now and when you need your money.