Choose wisely. There is only one correct answer to each question.
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1.
What if you dont know how much money youll need in seven years? How should you invest in that case?
Invest 25% or 35% in bonds and cash and the remainder in stocks. Investing everything in stocks is far too risky given the intermediate-term time horizon. And investing only in bonds wont provide much growth. Combining the two will provide stability and growth potential at the same time.
2.
What is the typical allocation of balanced funds?
60% stocks and 40% bonds. Balanced funds are typically weighted a little toward stocks.
3.
Which element is perhaps the most important for intermediate-term investors?
Diversification. Intermediate-term goals require a certain amount of growth without volatility, which can ruin the growth. Thats why intermediate-term goals tend to include a balance of volatilities in their investments.
4.
Why may balanced funds not be the ideal choice for intermediate-term investors?
Both of the above. You can often buy a short-term bond fund and a large-blend fund and pay less in annual expenses than if youd just bought a balanced fund. And some balanced funds may hold more in bonds than some in-betweeners need.
5.
What does a balanced fund own?
A balance of stocks and bonds. The typical balanced fund invests about 60% of its assets in stocks and 40% in bonds.
