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 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.
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.
What is the typical allocation of balanced funds?
60% stocks and 40% bonds. Balanced funds are typically weighted a little toward stocks.
5.
What is the best investment option for the growth portion of an intermediate-term portfolio?
A large-cap blend fund. Mutual funds offer instant diversification, and large-cap blend funds invest in the core of the U.S. market and include value and growth stocks among their holdings. They are steadier than most other types of stock funds.
