A portfolio manager is meeting with a new client, Ms. Chen, who indicates she wants to invest a lump sum for her retirement starting in 25 years. She states she has no immediate need for these funds, understands market fluctuations, and is comfortable with potential short-term losses for higher long-term growth. Based on this information, which of the following best describes Ms. Chen's primary suitability factor regarding time horizon?

Question: A portfolio manager is meeting with a new client, Ms. Chen, who indicates she wants to invest a lump sum for her retirement starting in 25 years. She states she has no immediate need for these funds, understands market fluctuations, and is comfortable with potential short-term losses for higher long-term growth. Based on this information, which of the following best describes Ms. Chen's primary suitability factor regarding time horizon?

Answer options: ✅ She has a long time horizon, indicating a higher capacity for risk.

• She has a short time horizon, requiring a more conservative investment strategy.
• Her time horizon is irrelevant as her risk tolerance is the sole determinant.
• Her time horizon is moderate, suggesting a balanced portfolio approach.

Correct answer: She has a long time horizon, indicating a higher capacity for risk.

Explanation: A 25-year investment horizon is considered long-term, which generally allows for greater recovery from market downturns and aligns with a higher capacity for risk, making growth-oriented investments potentially suitable.