NEW YORK (CNN/Money) - I'm 38 years old and have about $300,000 sitting in a money market fund. I need to move a good portion of this money to a bond fund to balance my asset allocation, but I'm worried that when interest rates rise, the bond fund will take a hit. So where can I put this money so it will be relatively safe?

-- Melvin, Westwood, Mass.

Excuse me for playing Sigmund Freud here, but your question reveals a bit of a schizophrenic view of investing.

On the one hand, you talk about the need to adhere to an asset allocation policy.

But then you talk about an idea that's totally contradictory to the notion of asset allocation -- i.e., market timing, which is moving (or in this case deciding not to move) money from one asset class to another because of your view of what might happen in the markets over the short term.

Hmm...Did your mother and father used to argue a lot about asset allocation?

Seriously, I can fully understand your dilemma. Intellectually you know that asset allocation is the right way to go, that by divvying up your money among stocks, bonds and cash, you can earn competitive returns while preventing your portfolio from being decimated by a downturn in one part of the financial markets.

Emotionally, however, you're having a hard time carrying out the plan, or at least the part that involves putting some of your money in bonds, which you seriously think could suffer losses.

So what do you do?

Well, I believe that in investing, you're almost always better off investing according to time-honored long-term principles rather than short-term tactics based on guestimates and emotion.

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Think about it. The reason for creating an asset allocation mix in the first place is because we recognize that we don't know what will happen in the future.

Of course, sometimes it seems that we really do know what's going to happen, and we feel compelled to act on it. You, for example, seem sure that interest rates are about to rise, which makes you reluctant to include bonds in your portfolio.

Fair enough.

But do you really know rates are about to rise? Granted, with the economy gaining momentum I think the odds of rates rising are higher than them falling. But the fact that most inflation indicators remain calm and productivity gains are high suggests rates could very well remain stable for some time -- or inch up only a bit if they do start to rise.

We just don't know.

Maybe you could wait until rates have risen, making your bond purchase a better buy. On the other hand, I remember that back in early 2000 when it really was a great time to buy bonds, most investors wanted nothing to do with them.

And, in fact, investing history is replete with examples of investors moving into the wrong asset class at the wrong time and failing to go into the right asset class at the right time, so I'm not very confident about people's ability to move adeptly among different sectors of the market.

All of which says to me that your initial instinct to stick to your asset allocation is the correct one. Use our Asset Allocator or one of the many other asset allocation tools on the Web to figure out how much of your money should be in stocks, how much in bonds and how much in cash, and then re-arrange your holdings to conform to the allocation that's right for you.

That doesn't mean, by the way, that you're automatically setting yourself up for a bloodbath in the bond portion of your portfolio should interest rates rise. There are several ways you can maintain your asset allocation while mitigating the damage of rising rates.

For one, you can keep the bulk of your bond or bond fund holdings at the short-to-intermediate range of the maturity scale, say, two to seven years or so.

And since not all bonds are hurt equally by rising rates, you can also reduce interest-rate risk by diversifying your holdings among different types of bonds, including municipal bonds, high-quality corporates and TIPS (Treasury Inflation-protected securities).

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You might even put a small dollop of your bond portfolio in a junk-bond fund, since their higher coupon rates make them less vulnerable to losses from rising rates.

Yes, individual junk bonds do have a higher chance of default, but you can manage that risk by investing in a fund that broadly diversifies among many junk issuers and by limiting your junk bond holdings to a small percentage of your portfolio.

To screen for various types of bond funds with low expenses and decent track records, click here.

I'm sorry, but our time's up for today. I think we're making real progress, though, and maybe next week we can start working on some of those other issues.

Walter Updegrave is a senior editor at MONEY Magazine and is the author of "Investing for the Financially Challenged." He also answers viewers' questions on CNNfn's Money & Markets at 4:40 PM on Mondays.