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I have four government CDs worth $5,000, and each has reached maximum growth. The returns in interest are very low. What are my options in medium risk/medium return accounts or funds?
-F. Kinsey II, New Orleans
To obtain moderate growth from your investments, I’d recommend selecting a set of mutual funds that have varying investment styles. That way, you will build diversity into your new portfolio that should protect you from market fluctuations. You can research funds of interest at Morningstar.com.
My choices would be: a foreign large blend fund, to give you exposure to overseas stocks and bonds at a time when they are excelling; a moderate allocation fund, to capture the full benefit of the moderate risk investing that you desire; a multisector bond fund, to give you an experienced bond manager who can select the right mix of bonds that will perform in any market; and a domestic mid-cap blend fund, to give you exposure to affordable companies that should have room to grow when the economy begins moving again.
Over the last three years, Morningstar reports that funds in these categories have averaged returns of 25.15%, 13.11%, 8.94%, and 13.49%, respectively. While these average returns are not guaranteed, they give you an idea of what is possible if you select the right mutual fund manager in the right fund category.