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Chapter 11. The Name Game—Understanding ... > Getting to Know the Major Investment... - Pg. 108

The Name Game--Understanding the Different Types of Mutual Funds 108 Our Advice Match your investments and their inherent risks with your time horizon (i.e., time to your goal). In other words, if your goal is long-term, you want to avoid long-term risk (inflation). If your goal is short-term, you should avoid short-term risk (the stock market). Short-term goal, invest in cash equivalents. Long-term goal, invest in stocks. Yup. It's that simple. Getting to Know the Major Investment Categories Every 401(k) plan has a lineup of funds. The average 401(k) plan offers participants about eight different funds from which to choose. Some plans offer three funds, some ten, and some even give you the opportunity to invest in the entire stock market. The trend is certainly toward more choice. From our perspective, more is not better. In fact, eight to ten funds are about all you need to have sufficient choice and to meet your financial goals. No matter how many funds you have or who manages them, all funds can be categor-ized into the three major investment categories (safety, income, or growth). From there, you can scoop your funds into different "flavors" within each of these categories.