Course 209: How to Invest for Intermediate-Term Goals
Start with the Right Mix
In this course
1 Introduction
2 Start with the Right Mix
3 Which Investments to Choose
4 What About Balanced Funds?

As with long-term investing, intermediate-term investing begins with determining your goals, and how much money you need to meet them.

If you know how much money you'll need to fund your goal--say, the money down you'll need for that Jag--you can use asset allocation tools such as Morningstar.com'sAsset Allocator to find the asset mix that will allow you to come closest to your goal.

To review how to determine your asset allocation as well as how to use Asset Allocator, refer to Portfolio 105: Determining Your Asset Mix.

But maybe the amount of money you'll need for your goal is unclear, or maybe you're flexible about the amount. You probably won't need a set amount when you walk out of prison, for example--you just want more than you have now. Or you know you won't be able to accumulate the $150,000 that you'll need to send your daughter to college in six years, so you'll take whatever you can get.

In these cases, you'll need a portfolio that falls between the short-term portfolio and the long-term portfolio--one that combines elements of the two. Investors with short time horizons use bonds or cash to preserve their money; those in for the long haul usually rely on higher-returning stocks, because they have the time to recoup any losses. In-betweeners should use stocks to grow their money and bonds to protect what they make.

Many advisors recommend that intermediate-term investors put 25% of the money in a safety net of bonds or cash and the remaining 75% in stocks. Those worried about risk might want to place 35% of their portfolio in bonds or cash.

Next: Which Investments to Choose >>


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