Gallio Letter: How Long Should You Stay Invested?
Your time horizon determines your strategy. The longer you can leave money alone, the better your odds and the higher your risk tolerance can be.
How Long Should You Stay Invested?
Key Takeaways
- Time horizon (how many years until you need the money) is one of the biggest factors in investing strategy, more important than most people realize.
- Over 20-year periods, stocks have historically always recovered and produced positive returns. Short-term, they’re unpredictable; long-term, they trend up.
- Match your investments to your timeline: cash for under 2 years, bonds for 2–5 years, stocks for 5+ years, and full stock exposure for 10+ year horizons.
Why Time Matters So Much
Short-term, markets are random. Any given year might be up 25% or down 25%. Nobody can reliably predict next year’s returns.
Long-term, patterns emerge. Over 10-year periods, stocks usually rise. Over 20-year periods, almost always. Time tilts the odds heavily in your favor. It’s not guaranteed, but it’s close to the strongest pattern in financial history.
Compounding also needs time to work. The difference between 10 years and 30 years isn’t just 3 times the money. It can be 10 times or more, depending on returns. Every additional year compounds previous years.
This is why starting early matters so much. Ten years of waiting isn’t just ten years. It’s the entire compounding difference between a comfortable retirement and a tight one.
Match Your Horizon to Your Investments
Under 2 years: Don’t put this in stocks. If you need the money soon and a crash hits, you might be forced to sell at the worst time. Savings accounts and money market funds are boring, but they’re reliable. You’ll lose to inflation, but at least you’ll have the money when you need it.
2–5 years: Maybe some stocks, but keep it mostly in bonds and cash. You need some growth, but you don’t have time to recover from a major crash. Diversification toward safety makes sense here.
5–10 years: Stocks work well here. You have enough time to ride out moderate drops and recover. An aggressive allocation still carries risk, but you have a reasonable runway.
10+ years: Lean into stocks. Short-term swings don’t matter when you’ve got a decade in front of you. You’ll see crashes. You’ll recover from them. The path won’t be smooth, but the direction tends upward.
20+ years: Full stock exposure makes sense. The S&P 500 has never had a negative 20-year rolling return since 1950. Even with terrible timing, even buying at the absolute peak right before major crashes, it worked out over 20 years.
This is historical data, not a guarantee. But it’s the pattern.
Common Real-World Scenarios
Retirement: You’re 30, planning to retire at 65. That’s 35 years until you stop working. Even if you retire at 50, you still have 15-20 years before needing the money, plus another 30-40 years of retirement after that. Most people have much longer horizons than they initially think.
House down payment: You need the money in 5 years. Keep most of it safe. A 30% drop right before you want to buy would force you to either delay or buy less house. Bonds and cash are appropriate here.
Education funding: Your child is 5 years old. You have roughly 13 years until college. That’s a genuine long-term horizon. Your child is 15? Be conservative, only 3 years left.
Financial independence: Calculate the years to your target. That’s your horizon. Then match your allocation to those years.
Your Approach Should Shift Over Time
The strategy isn’t static. Your allocation should gradually become more conservative as you approach your goal.
Thirty years out: you can be aggressive. Stocks can be 80-90% of your portfolio.
Ten years out: start shifting toward balance. Maybe 60-70% stocks, the rest bonds and cash.
Five years out: protect what you’ve built. Maybe 40-50% stocks.
This doesn’t mean selling everything at retirement. You still need growth for a 30-year retirement. Money you won’t touch until year 20 of retirement still has a 20-year horizon. But the balance shifts toward stability as your cushion shrinks.
Extending Your Runway
Start earlier. Five years earlier means five more years of compounding. That could double your retirement money compared to starting later.
Stay flexible. If the market crashes right before your retirement date, having the ability to delay by a year gives you recovery time. That flexibility is worth money.
Remember that retirement isn’t one day. Money you won’t need for 20 years has a 20-year horizon, even if you retired at 65. Sequence of returns matters for early retirement, but it matters less if you can wait out crashes.
Every year you delay shortens your horizon and shrinks your compounding runway. That cost is real and compounds too.
The Mental Game
Long-term investing requires patience. Your portfolio will drop. Markets will crash, recover, crash again. You’ll see red numbers. It’ll feel bad.
A 30% crash with 25 years ahead? Barely matters. History says you’ll recover and keep growing. Same crash with money needed next year? That’s a genuine disaster. Knowing your horizon changes how you should react to crashes.
Use Gallio to track your investing timeline. Set your goals with the years ahead clearly defined. When volatility hits, you’ll have a clear view of whether it actually matters for your specific timeline. A crash barely registers when you have decades ahead. It matters urgently when you’re three years from your goal.
Time in the market beats timing the market. Stay calm through the cycles. Your horizon is your armor.
Gallio tracks your investing timeline alongside your goals. When volatility hits, you’ll see whether it actually matters for your specific horizon.
How Long Should You Stay Invested?
Key Takeaways
- Time horizon (how many years until you need the money) is one of the biggest factors in investing strategy, more important than most people realize.
- Over 20-year periods, stocks have historically always recovered and produced positive returns. Short-term, they’re unpredictable; long-term, they trend up.
- Match your investments to your timeline: cash for under 2 years, bonds for 2–5 years, stocks for 5+ years, and full stock exposure for 10+ year horizons.
Why Time Matters So Much
Short-term, markets are random. Any given year might be up 25% or down 25%. Nobody can reliably predict next year’s returns.
Long-term, patterns emerge. Over 10-year periods, stocks usually rise. Over 20-year periods, almost always. Time tilts the odds heavily in your favor. It’s not guaranteed, but it’s close to the strongest pattern in financial history.
Compounding also needs time to work. The difference between 10 years and 30 years isn’t just 3 times the money. It can be 10 times or more, depending on returns. Every additional year compounds previous years.
This is why starting early matters so much. Ten years of waiting isn’t just ten years. It’s the entire compounding difference between a comfortable retirement and a tight one.
Match Your Horizon to Your Investments
Under 2 years: Don’t put this in stocks. If you need the money soon and a crash hits, you might be forced to sell at the worst time. Savings accounts and money market funds are boring, but they’re reliable. You’ll lose to inflation, but at least you’ll have the money when you need it.
2–5 years: Maybe some stocks, but keep it mostly in bonds and cash. You need some growth, but you don’t have time to recover from a major crash. Diversification toward safety makes sense here.
5–10 years: Stocks work well here. You have enough time to ride out moderate drops and recover. An aggressive allocation still carries risk, but you have a reasonable runway.
10+ years: Lean into stocks. Short-term swings don’t matter when you’ve got a decade in front of you. You’ll see crashes. You’ll recover from them. The path won’t be smooth, but the direction tends upward.
20+ years: Full stock exposure makes sense. The S&P 500 has never had a negative 20-year rolling return since 1950. Even with terrible timing, even buying at the absolute peak right before major crashes, it worked out over 20 years.
This is historical data, not a guarantee. But it’s the pattern.
Common Real-World Scenarios
Retirement: You’re 30, planning to retire at 65. That’s 35 years until you stop working. Even if you retire at 50, you still have 15-20 years before needing the money, plus another 30-40 years of retirement after that. Most people have much longer horizons than they initially think.
House down payment: You need the money in 5 years. Keep most of it safe. A 30% drop right before you want to buy would force you to either delay or buy less house. Bonds and cash are appropriate here.
Education funding: Your child is 5 years old. You have roughly 13 years until college. That’s a genuine long-term horizon. Your child is 15? Be conservative, only 3 years left.
Financial independence: Calculate the years to your target. That’s your horizon. Then match your allocation to those years.
Your Approach Should Shift Over Time
The strategy isn’t static. Your allocation should gradually become more conservative as you approach your goal.
Thirty years out: you can be aggressive. Stocks can be 80-90% of your portfolio.
Ten years out: start shifting toward balance. Maybe 60-70% stocks, the rest bonds and cash.
Five years out: protect what you’ve built. Maybe 40-50% stocks.
This doesn’t mean selling everything at retirement. You still need growth for a 30-year retirement. Money you won’t touch until year 20 of retirement still has a 20-year horizon. But the balance shifts toward stability as your cushion shrinks.
Extending Your Runway
Start earlier. Five years earlier means five more years of compounding. That could double your retirement money compared to starting later.
Stay flexible. If the market crashes right before your retirement date, having the ability to delay by a year gives you recovery time. That flexibility is worth money.
Remember that retirement isn’t one day. Money you won’t need for 20 years has a 20-year horizon, even if you retired at 65. Sequence of returns matters for early retirement, but it matters less if you can wait out crashes.
Every year you delay shortens your horizon and shrinks your compounding runway. That cost is real and compounds too.
The Mental Game
Long-term investing requires patience. Your portfolio will drop. Markets will crash, recover, crash again. You’ll see red numbers. It’ll feel bad.
A 30% crash with 25 years ahead? Barely matters. History says you’ll recover and keep growing. Same crash with money needed next year? That’s a genuine disaster. Knowing your horizon changes how you should react to crashes.
Use Gallio to track your investing timeline. Set your goals with the years ahead clearly defined. When volatility hits, you’ll have a clear view of whether it actually matters for your specific timeline. A crash barely registers when you have decades ahead. It matters urgently when you’re three years from your goal.
Time in the market beats timing the market. Stay calm through the cycles. Your horizon is your armor.
Gallio tracks your investing timeline alongside your goals. When volatility hits, you’ll see whether it actually matters for your specific horizon.