Let time horizons guide investment portfolio

Want to invest your liquid assets, but not quite sure what to do? Here's why you should think about how long you want your money tied up.

Q: In 2008, I liquidated assets in a mutual fund and have held them in cash since. I am uncomfortable re-exposing myself to the risk of the stock market, but I want to earn more interest than I'm getting in my savings account. Any suggestions?

If your time horizon is long-more than 10 years-then consider a blended portfolio comprised of, say, 75% short-term bonds and 25% large-capitalization stocks paying high dividends. This approach exposes you to a little more risk but opens opportunities for greater returns. For example, the 25-year average of the Standard & Poor's 500 from 1986 through 2011 was 9.27%, with some mutual funds outperforming this index. But you must be prepared emotionally to ride out the market's ups and downs through the years.

Answers to our readers' questions were provided by Charles Matt, CFS, a financial adviser with Sapient Financial Group in San Antonio, Texas.