When you have 10 or more years to go before you plan to dip into your money, there's nothing wrong with putting all of it into stock funds, including foreign funds and emerging-markets funds.
But things are different for shorter-term goals, such as saving for a new house.On the one hand, you don't want to put all your money into stocks only to be forced to sell during a bear market. But you also don't want to be so conservative that you miss out on the superior appreciation the stock market affords.
The solution? A balanced portfolio with about half the money in stocks and half the money in bonds. This is an ideal mix when you're investing for a short-term goal that is, say, four to six years in the future.
The most important thing when you're allocating your money among funds is your time horizon. If you're investing for college for your high school-age children, for instance, the portfolio in this column will probably suit you better than the one in last week's column on investing for college.
The following is a simple, four-fund portfolio of no-load funds for investing for a short-term goal. Included are the recommended percentage of assets each should represent:
- HARBOR BOND (45 percent) is run by William Gross, 51, the head of PIMCO, one of the most highly regarded bond managers in the nation. Believing interest rates are still falling, but gradually, Gross has one-third of assets in GNMA mortgage-backed securities, another third in U.S. Treasuries and 15 percent in foreign bonds. Call (800) 422-1050.
- JANUS (25 percent) has matched the return of Standard & Poor's 500-stock index over the last five years - but with a lot less risk. Manager Jim Craig, 39, is unafraid to raise cash when his outlook dims. He hunts for stocks apt to deliver higher-than-expected earnings. Call (800) 525-8983.
- MUTUAL QUALIFIED (10 percent), run by Michael Price, 44, invests most of its assets in cheap stocks. But it also invests heavily in stocks and bonds of companies in bankruptcy reorganization and in the shares of announced takeover targets. Call (800) 448-3863.
- ROYCE PREMIER (20 percent) invests in small companies - but only in higher-quality names.