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Chapter 14. Betting on the Right Horse > Match Your Investor Profile to an Inve... - Pg. 143

Betting on the Right Horse 143 If your 401(k) plan has cash equivalents, fixed-income funds, balanced (or moderate asset alloca- tion) funds, and stock funds in it, then this process will work like a charm. If your 401(k) plan has no cash-equivalent investment, then just treat the cash portion of each portfolio as fixed income and follow along. You will note that there are two possible yet different strategies that you can follow to build an investment portfolio (mix) within a 401(k): · Strategy A--All funds except the balanced fund Warning! Although the portfolios shown in Figure 14.2 are based on a previous 50-year history, we all know that "past performance is no guarantee of future results." This means that if you are going to follow the guide- lines, you must be a long-term investor --at least 5 and preferably 10 or 15 years. The future may be entirely different; it's really anybody's guess. · Strategy B--Only the balanced fund In other words, you can build your portfolio by investing in a combination of individual funds, or you can let the experts do it for you by selecting a balanced or moderate asset-allocation fund. The next