Time and risk are inseparable. The shorter the
time you have to realize a positive return on your investment,
the more you would feel the impact if the value of your portfolio
dropped. And the more volatile the individual holdings in your
portfolio, the greater that risk becomes. (Of course, it's
also true that you could realize an equally positive gain in the
short run, though that's not something to count on.)
Conversely, the longer you have to hold your investment, the less
important day-to-day or month-to-month fluctuations in value become.
At the same time, there's a greater potential for increasing
value. For example, though stocks are more volatile than either
bonds or cash, over the long term stocks in general (though not
each individual stock) tend to gain more in value than either
of those other asset classes.
The opposite is often true of bonds. They are less likely to lose
or gain value dramatically in the short term. But over 20- or
30-year terms, the buying power of the bond's yield and value
of the principal may be diminished by inflation. And long-term
bonds issued when interest rates are low typically lose value
in the secondary market if interest rates go up.
Thomas J. Dorsey, President and
co-founder of Dorsey, Wright &
Associates
Thomas J. Dorsey, President and
co-founder of Dorsey, Wright &
Associates 
