Without a doubt, one of the most important inputs in a successful outcome for your investment portfolio is time. In the finance world, this is usually expressed as your “time frame” or “time horizon”.

For the sake of keeping things simple, it’s usually characterized in phases that include: short, intermediate, and long-term. Most investors likely have an intermediate or long-term time horizon that allows them some flexibility when it comes to riding the ups and downs of the markets or making a few mistakes along the way. A longer time horizon can allow you more flexibility to accumulate, grow, and preserve your wealth.

Those with shorter time frames don’t have the luxury of conceding wide swings in their accounts or patience to allow a specific investment to develop. They are typically more risk averse and cut losses quickly to avoid any severe drops in their portfolio. Market participants with a short time frame may be nearing the end of a phase in their life or take a more trading oriented approach with their investment endeavors.

That is not to say that investors with long time horizons should ignore potential risks and/or market trends. In fact, they should be just as adept at recognizing periods of over exuberance and opportunity as anyone else. In my opinion, putting your portfolio on autopilot and ignoring deflationary asset classes is a sure way to underachieve your goals.

The one constant I have seen more than any other in my investment career with respect to time frame is that most people think they are a long term investor, but that doesn’t always translate into being able to handle more volatility.

Pro Tip: Don’t confuse time horizon with risk tolerance.

The traditional asset allocation model would say that if you don’t need to access the money in your retirement accounts for 10 or 20 years that you should be more aggressive with it. This translates to higher allocations in the SPDR S&P 500 ETF (SPY) versus lower exposure to the Vanguard Total Bond Market ETF (BND) and cash.

However, there are some people that can’t handle that style of portfolio no matter what circumstances or statistics state otherwise. They are simply wired to be more conservative no matter what data is presented to them. There is nothing wrong with that, it’s simply a different way to looking at the inherent opportunities and risks that we face every single day.

The worst thing you can do with your money is shoot for too aggressive positioning and then make ill-timed entries and exits based on fear or greed. These vicious cycles can cause significant damage to your portfolio as well as your overall investment psychology.

My advice for those conservative investors out there is to keep a healthy mix of assets designed to offset volatility and diversify your risks. Having the flexibility to shift in response to changing market conditions with incremental steps or having a risk management plan in place to mitigate a steep decline should be high on your priority list as well.

Your time horizon should become a more important consideration the closer you get to retirement or initiating a new phase in your life that necessitates a change in your investment style. Keeping some of these factors in mind will help prioritize your overall goals and asset allocation. Remember that each investor is unique in their situation and should be treated as such.