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Diversify Y our Investment Por tfolio

Think about Your Time Line

Here’s another way to approach this important question of what types of
stocks and, to a lesser extent, bonds to buy. Consider these guidelines:

• With assets that you won’t want for living expenses for 10 years or
more, buy stocks or funds that are in the long-term growth categories.
• If you won’t have to cash in some of your investments for at least fi ve
years, focus on “total return.” This means vehicles that pay dividends
but are also likely to grow in value over time. I think of this category
as “conservative long-term growth.”
• For money that you’ll need in less than five years, invest it in bonds or

bond funds.
• If you’ll want to use your money in one year or less, use money market
funds.

Okay, let’s delve more deeply into diversifying your investment portfo-
lio. Always recognize that you can approach this from different perspec-
tives, and that there are several ways to diversify in order to get where you

want to go. Be flexible, not rigid. Remember, investing is more art than
science.
At the least, you probably should own individual issues and /or equity
funds in three areas: large-company stocks, medium- or small-company
stocks, and foreign stocks.
Here are suggestions for three typical situations:

1. You invest for long-term growth: U.S. stocks and growth stock funds,
60 percent of your portfolio; international stocks or funds, 30 percent;
and cash, 10 percent.

2. You invest for growth and income: U.S. equities, 50 percent; international
stocks, 20 percent; fixed-income investments, 15 percent; and cash,

15 percent.
3. You invest primarily for income: U.S. stocks, 40 percent; international
stocks, 15 percent; fixed-income investments, 25 percent; and cash,

20 percent.

As your portfolio grows, the next level of diversification is to buy stocks
or funds that employ different approaches: value stocks that are cheap based
on assets or current earnings; stocks of companies that are expected to show

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