Three portfolios for achieving your goals


Published: Monday, May 1, 2006 at 6:01 a.m.
Last Modified: Sunday, April 30, 2006 at 11:15 p.m.
The most important decision in combining mutual funds into a rational portfolio is how much to place in stocks. Over the long term, stocks far outperform bonds and cash-type investments. For every 10-year period since 1926, stocks outpaced bonds and cash 80 percent of the time. That is why, for long-term investing, you should place most of your money in stocks or stock funds.
You should also diversify your portfolio. Different kinds of stocks take turns leading (and lagging) the markets. The performance divergences are unpredictable and often enormous. Over the long term, different types of stock funds produce roughly similar results, although small-company stocks perform better (and are riskier). Own some of each category to smooth out ups and downs.
Roughly half of your stock money belongs in large-company funds, split between funds that invest in growing companies and funds that invest in bargain-priced ones. Put one-fourth into foreign funds, and divide the final fourth among small-company funds that invest in growth companies and value stocks.
  • If your goal is 10 or more years away: Invested entirely in stocks, this package has a healthy weighting in foreign companies, including a small allocation to an emerging-markets fund. Portfolio: Bridgeway Aggressive Investors 2, 25 percent; Marsico Growth, 25 percent; RS Value, 25 percent; Dodge & Cox International Stock, 20 percent; and SSgA Emerging Markets, 5 percent.
  • If your goal is five to 10 years away: When you near retirement or when your children face high school, gradually add a bond fund, selling off stock funds and placing the proceeds in the bond fund. Portfolio: Dodge & Cox International Stock, 20 percent; T. Rowe Price Growth Stock, 20 percent; Bridgeway Aggressive Investors 2, 15 percent; RS Value, 15 percent; and Loomis Sayles Bond, 30 percent.
  • If you need the money NOW: Use this portfolio if you're within five years of a goal or already retired. Portfolio: Dodge & Cox International Stock, 15 percent; T. Rowe Price Growth Stock, 15 percent; Bridgeway Aggressive Investors 2, 10 percent; T. Rowe Price Real Estate, 10 percent; RS Value, 10 percent; Harbor Bond, 20 percent; Fidelity Floating Rate High Income, 10 percent; and Loomis Sayles Bond, 10 percent.
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