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.
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.
3.
Intermediate-term investors are usually advised to _______.
Use stocks to grow their money and bonds to protect what they make. This is a good balance for many intermediate-term goals.
4.
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.
5.
What is the typical allocation of balanced funds?
60% stocks and 40% bonds. Balanced funds are typically weighted a little toward stocks.