(FORTUNE Magazine) – JOHN T. BEATY, 44, speaking here in his own words, suggests an aggressive approach for this investor. Bypassing mutual funds, Beaty would sock 40% of his client's assets into five individual equities in search of long-term capital growth. But he balances that relatively risky play with a U.S. Treasury note, the safest of fixed-income securities.

You're 25 years old and single. You work for a big company. You look ahead and think maybe this isn't what you'll want to do when you're 30. You never know. You may want to get married. You may want to have kids. You may want to set up your own company. Having a financial base gives you choices. The earlier you start building that base, the bigger it will be. The bigger the financial base, the more choices you have. So building assets should be the primary concern at this stage of life. Since long-term growth is the objective, we suggest that 40% of financial assets be committed to equities. The average annual rate of return for stocks since 1926, when records were first kept, is 9.9%. That includes both October 1929 and October 1987. An equal share goes into fixed income. And, given that we are in a state of political transition, we like 20% in cash to take advantage of any developments after the election. Considering the small size of our stake, many people may prefer the mutual fund route for stocks, particularly if they do not want to spend a lot of time thinking about their investments. Transaction costs are low with funds and you get professional money managers. But if you like to make your own decisions, individual stocks are more interesting, although certainly more risky. You can cut costs by using a discount broker and reduce risk by diversifying well. I pick Johnson & Johnson, a big company with a household name, because it gives our portfolio an international dimension. The firm is well diversified, with 50% of its revenues coming from overseas. J&J's Retin-A, the drug that helps reduce wrinkles, has increased interest in the company among both consumers and retailers. Its chief executive officer, James Burke, is one of the blue-chip guys in business. Boeing is our capital goods play. The near tragedy of the Aloha Airlines jet reminded everyone how old the airline fleets are becoming. Now a lot of airlines seem to be buying new planes. Korean Airlines ordered nine Boeing 747s this spring. Japan Air Lines announced it planned to buy 15. United Airlines and American Airlines combined ordered 80 of the mid-size 757s. And International Lease Finance ordered some of just about every type of plane Boeing makes, for a total of 99 airliners. Boeing's prospects are pretty well defined, even if the rest of the economy slows sometime in the next 12 to 18 months. We think the growing interest in cleaning up hazardous waste is good news for Safety-Kleen of Elgin, Illinois. Safety-Kleen started out reprocessing cleaning fluids used in automobile repair shops. Now the company also removes and processes hazardous chemicals used by dry cleaners and a lot of medium- size businesses. Du Pont is large enough to take care of any disposal problems it may generate. But your local dry cleaner isn't. . Allied Capital is our recommendation for exposure in the small-stock category. It's a venture capital firm here in Washington. Although it's a fairly small company with about $90 million in assets, the management has spread that into investments in about 575 different businesses. Allied's rate of return over the last ten years has been a very steady 15% a year. Washington Real Estate Investment Trust, another local firm, owns 27 properties all within an hour's drive of the company's headquarters in Bethesda, Maryland. So it's a hands-on management. Only five of the properties have mortgages. Real estate values in Washington have traditionally been recession-resistant. And this REIT gives you a fairly good dividend yield, 5.8%, while you wait for the growth. The 40% in the Treasury note may look tame, but Treasuries are returning about 8.6% and the interest is exempt from state and local taxes. Since this investor is in the 28% tax bracket, his after-tax return will be 6.2%. That's comparable to municipal bonds, but Treasuries are a lot more liquid.

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