When looking at investing over longer time horizons, there end up being two different types of risk we face. The first type, market risk, is the risk of losing money like in the stock market. Most investors understand this type of risk.

The second type, inflation risk, is the risk that the money you have won’t buy as much as it does now. Which risk matters more? The shorter your time horizon, the more you should worry about market risk, but the longer your time horizon, the more you should worry about inflation risk. That’s why the right portfolio for someone with a short time frame might be very different from someone with a long time frame.