NEW YORK (CNN/Money) - My wife and I are almost 30 and we want to maximize the growth of our portfolio with the least risk. Right now we have about $35,000 in a money market fund, but have hesitated transferring the money into other mutual funds. Would you recommend we do?

-- Josh, Fishers, Indiana

The first thing I recommend is that you and your wife start acting your age. You're not even 30 and yet you're investing like 99-year-olds.

Look, you've got a long life ahead of you and a money-market fund just isn't going to provide the returns you'll need to keep the after-tax purchasing power of your money growing faster than inflation.

It's time to take some risks with your thirty-five grand. I'm not talking "throw it all in beaten-down tech stocks in the hope they'll surge again" kind of risk. I'm talking prudent risk -- building a diversified portfolio that includes stocks for growth and some bonds for stability and income.

So here's what you do. First, if you don't already have three to six months of living expenses set aside for unexpected emergencies, create a rainy-day fund. That money you can keep in your money-market fund because you want to be sure it will be there if you need it.

Now take the rest of your stash and create a portfolio of stock and bond funds that jibes with your investing time horizon and tolerance for risk. Since you and your wife aren't even 30, I assume we're talking a very long time horizon, certainly 40 or more years. That argues strongly for putting the overwhelming majority of your money in stocks.

Granted, that may seem a bit scary now, what with the market still down after two years and seemingly unable to regain its past highs. But remember, the market has gone through these periodic convulsions before and will go through them again. Someone your age has got to think beyond the short-term gyrations and focus on how much you want your money to grow long term. And history shows that stocks are your best bet for long-term growth.

That said, though, I wouldn't place all my money in stocks. Why? Well, even though I expect stocks will continue to provide higher long-term returns than bonds (especially since they've had some of the air taken out of their prices over the past two years), I know those returns aren't guaranteed. History isn't a roadmap to the future.

So to hedge against the possibility that stocks might not reprise their glorious past, I would put a bit of my money into bonds.

How much? That's where we get to the risk tolerance that I mentioned earlier. As I see it, the amount you place in bonds comes down to two things: first, how confident are you that stocks will beat bonds over the long run? The more confident you are, the higher the percentage of your holdings you can put in stocks.

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Second, how much can you tolerate the value of your portfolio dipping and diving in response to short-term market turmoil? Back in the late 1990s a lot of people swore they had nerves of steel and would never sell just because of a temporary swoon in stock prices. But when prices slipped 50 percent or more in some cases, many of these same people bailed from stocks because they couldn't tolerate the losses or the fear of even larger losses.

So be realistic about what kind of short-term setback might send you scurrying and then adjust your stocks-bonds mix accordingly. The bigger the short-term loss you can tolerate, the larger the percentage of your portfolio you can put in stocks. If a dip in the market sends you looking for the Pepto-Bismol bottle, then you'll want to add more bonds to your portfolio.

Coming up with a mix that's right for you is more art than science, although there are some quantitative tools that can help. If you go to our Asset Allocator, for example, you'll take a short interactive quiz that will lead you to an asset-allocation pie chart, which can serve as a starting point for building your portfolio.

You also will find similar tools and advice for creating an asset mix at the Web sites of such companies as Charles Schwab, Vanguard, Fidelity and T. Rowe Price.

Once you've got your mix down, you must decide which funds to buy to fill out your portfolio. To my mind, the easiest way to do this is to go with index funds that are designed to match specific market benchmarks.

So, for example, if you want to invest 50 percent of your portfolio in large-cap stocks and 10 percent in small-caps, you could create that mix simply by putting 50 percent of your money in a fund that tracks the S&P 500 index and 10 percent in a fund pegged to a small-stock index such as the Russell 2000. For more on how index funds work and how to choose them, click here.

The other way is to go with actively managed funds, or funds whose managers try to beat the indexes. That makes your job a little tougher since you want to find funds that, ideally, will outperform their peers and perform as well as or better than the indexes after fees. But investors rise to this challenge all the time, with varying degrees of success.

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If you want to go this route, you'll find some fund suggestions at our Asset Allocator tool or you can search for funds with solid performance and reasonable fees by going to our Fund Screener.

And, of course, there's nothing to prevent you from using a hybrid strategy -- that is, having index funds as a core holding and then filling out the rest of your portfolio with actively managed funds.

To sum up, it's time for you and your wife to start venturing out of that money market fund into the world of real funds. I know it may seem scary at first. But remember, when it comes to building wealth for the long haul, the biggest risk of all is playing it too safe.

Walter Updegrave is the author of "Investing for the Financially Challenged" and can be seen regularly Monday mornings at 8:40 a.m. on CNNfn.