(MONEY Magazine) – Last spring's two-percentage-point rise in interest rates caused the portfolios of some income-oriented investors to drop faster than Tipper Gore's jaw at a Madonna concert. Thus fund analysts now counsel a precautionary portfolio for investors who have current income as their primary goal: 25% in growth and income funds, 25% in intermediate-term bond funds, 15% in government bond funds and 35% in money-market or short-term bond funds. Such a mix might produce average annual returns of 9% to 11%. Among growth and income funds, Sheldon Jacobs, editor of the No-Load Fund Investor (P.O. Box 283, Hastings-on-Hudson, N.Y. 10706; $82 a year), recommends Vanguard's no-load Windsor II (800-662-7447), up 18.8% for the 12 months to July 1 and yielding 2.9%. Gerald Perritt, editor of the Mutual Fund Letter (205 W. Wacker Dr., Chicago, Ill. 60606; $115 a year), suggests Neuberger & Berman's Guardian, up 16.7%, recently yielding 3.1% (no load; 800-237-1413); and Selected American Shares, up 16.2%, yielding 2.6% (800-621-7321, 800-572-4437 in Illinois). Intermediate-term bond funds that hold bonds with maturities of five to seven years are another staple of income portfolios right now. Because such funds invest in issues that do not tie up money for the 20 to 30 years that longer-term bond funds do, they would lose only about 4% of net asset value, rather than 9%, for each percentage point increase in interest rates. Two such funds worth investigating are Alliance Bond-Monthly Income Portfolio, up 7.6%, yielding 9.1% (5.5% load; 800-221-5672) and Kemper Income & Capital Preservation, up 5.8%, yielding 10.3% (5.5% load; 800-621-1048). If you are in the 35% federal tax bracket or higher -- taxable income of $27,000 or more for individuals and $45,000 or more for married couples filing jointly -- intermediate-term municipal bond funds currently offer higher after-tax yields (6.2% on average) than do taxable investment-grade corporate bond funds (5.7%). Among tax-exempt funds, Ralph G. Norton, editor of the newsletter Muni Bond Fund Report (P.O. Box 2179, Huntington Beach, Calif. 92647; $143 a year), recommends Scudder's Managed Muni Bond, up 7.6%, yielding 7.2% (no load; 800-225-2470); and T. Rowe Price Tax-Free Income, up 4.8%, yielding 7.1% (no load; 800-638-5660, 301-547-2308 in Maryland). For investors willing to lengthen maturities in exchange for normally higher yields and greater risks, Norton suggests T. Rowe Price Tax-Free High-Yield, up 8.8%, yielding 7.6% (no load; 800-638-5660, 301-547-2308 in Maryland); and Stein Roe High-Yield Muni, up 7.9%, yielding 7% (no load; 800-621-0320, 312-368-7826 in Maryland). Investors who live in such high-tax states as California, New York and Massachusetts may find that so-called single-state muni funds -- those that invest in obligations of one state only -- offer still higher after-tax yields, because the income is exempt from federal, state and often local tax. Do not lose sleep in choosing a government bond fund. Reason: fully 79% of such funds either outgained the group's average 7.1% 12-month total return or lagged it by one percentage point or less. Perritt favors the no-load Fidelity Government Securities, up 4.1% for the 12 months to July 1, yielding 8.6% (800-544-6666, 617-523-1919 in Massachusetts). More conservative investors may prefer his shorter-maturity no-load choice, Twentieth Century U.S. Government, with a taut 2.6-year average maturity and an 8.2% yield, up 5.1% (800-345-2021, 816-531-5575 in Missouri).

CHART: TEXT NOT AVAILABLE CREDIT: NO CREDIT CAPTION: AIMING FOR INCOME DESCRIPTION: Examples of where to invest for a 35% cash, 25% growth and income, 25% intermediate-term bonds and 15% government bonds portfolio.