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At what point does one start to rebalance a more aggressive portfolio (all mutual funds) to a more conservative one with college 5 years and 7 years away? And what would be a good "recipe" for a conservative portfolio?


I think you probably know as well as anyone how to proceed. Five years is generally used as the shortest horizon for investing in the market.

On the other hand, you only need one years worth of college in six years. So maybe you want to move one years worth of finances in to a five year CD (depending on what kind of interest rate you can get) or a money market. And do that each year.

You may miss out on the market, but the money will be secure.

I think a lot depends on where the money is invested (is it in an account that must be used for education?), your ability to fund college your child's education with your income (in the event the market is down when you need the money), your willingness to take out student loans, and your risk tolerance.

In my experience risk can be defined as the likelihood that something will happen that will cause you to act in a manner that isn't to your advantage.

I hope this helps a little.


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Keith O'Malley
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