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Portfolios 209: How to Invest for Intermediate-Term Goals

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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?
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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?
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60% stocks and 40% bonds. Balanced funds are typically weighted a little toward stocks.
3.
Why may balanced funds not be the ideal choice for intermediate-term investors?
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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.
4.
What is the best investment option for the growth portion of an intermediate-term portfolio?
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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.
5.
What does the "blend" in large-cap blend funds refer to?
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Growth and value stocks. "Blend" is a recent term coined for those funds that include both growth and value stocks.