(MONEY Magazine) – By this point in our special report, you have had the chance to tot up your assets, and if you did, you probably found that you're worth more than you thought. There's just one problem: In all likelihood you still have a way to go to achieve true financial security. The cost of life's most important financial goals can be much steeper than most people imagine. Take retirement, for example. As the worksheet below shows, you will need about $149,000 (in 1992 dollars) for every $10,000 of your annual living expenses not covered by Social Security or company pensions. Want to send your bright five-year-old to a nice private college? You should be putting away about $500 a month, starting right now. How do you pull that kind of money together? Disciplined saving is important to meeting your goals, of course, but the road to security will be much smoother if you can wring the highest possible return out of what you save. One swift way to do that is to place all your chips on the next Wal-Mart or Fidelity Magellan, but few mortal investors have the psychic powers necessary to know in advance what those investments will be. Fortunately, there's another solution: Spread your money among stocks, bonds and cash investments like Treasury bills, short-term CDs and money-market funds. Maintaining a diversified portfolio makes sense because no single investment can be depended on to provide complete financial security. Stocks, which tend to deliver high long-term returns, are wildly unpredictable in the short term. Bonds keep up a reliable stream of income but their value can be devastated by a surge in inflation or a rise in interest rates. And while CDs and money funds protect you from market losses, their mediocre yields barely keep up with rising prices. In a diversified portfolio, however, strengths in one set of assets offset weaknesses in another -- and in the end you enjoy both high returns and reasonable safety. Consider the performance of stocks, bonds and cash since 1950. During the full period, stocks were the clear winners, with returns of 12.5%, according to the financial research firm Ibbotson Associates. They also lost money in 10 of those 41 years, however, including a 26.5% pasting in 1974. Intermediate- term bonds posted gains in all but five years, although their returns averaged only 6.2% overall. Even though cash (represented by Treasury bills) did not have a losing year, it averaged a mediocre 5.3% annual return. However, a portfolio that combined those three in roughly equal measure -- 35% stocks, 35% high-grade bonds and 30% cash -- would have returned an annually compounded 10%, according to mutual fund sponsor T. Rowe Price Associates. The combination would have made money in all but seven years. Furthermore, in those down years, losses averaged a mere 1.2%, compared with 12.3% for stocks alone. Naturally, a different mix of assets would have led to different results. ''About 90% of your long-run return can be explained by how you allocate assets among different investment categories,'' says Gary Brinson, president of Brinson Partners, a Chicago money-management firm. A greater tilt toward stocks, for example, would have produced a higher return -- but also wider price swings, so that you could have been caught short if you had to sell at an inopportune time in the market. That's why you need to know how much short- term uncertainty you can accept before you decide how to allocate your assets. After all, a portfolio that promises long-term annual gains of 15% will never pan out if you lose your nerve and rejigger your holdings at the first downturn. The quiz on page 110 will help you judge just how suited you are psychologically for various levels of investment risk. Another crucial aspect of your risk tolerance, though, is time. ''If you plan to start drawing on your money within a few years, a sour market can hurt you more than inflation,'' says Roger Gibson, president of Gibson Capital Management in Pittsburgh. ''But if you won't need the money for a decade or more, you face a much more significant risk from even modest amounts of inflation.'' Thus if your goals are coming up soon, you should favor safer investments such as cash and bonds. If you plan to let your investments ride for several years, you ought to lean toward riskier, higher-return classes of assets, such as stocks. While that generally means that older people should play it safer than younger ones, the truth is more subtle than that. Even 60-year-olds have a long timetable -- after all, they can expect to live at least another 20 years or so -- and most experts these days recommend that they have about half their portfolio in equities to keep inflation at bay. (For profiles of mutual funds especially suited for this purpose, see ''Five Funds to Retire On'' on page 150.) Conversely, a 45-year-old couple with teenage kids need to keep risks in check to be sure of having ready cash when, say, that first $4,000 to $8,000 tuition bill thuds onto their kitchen table. The model portfolios at right show three sample allocations tailored to conservative, moderate and aggressive investors. The basic building blocks of each portfolio are stocks, high-grade bonds and cash. Conspicuously absent is probably the largest chunk of your net worth, your home. Most financial planners advise leaving your house out of your investment calculations. After all, you're not likely to sell a 12-room colonial and move your family into a studio apartment just to balance your portfolio. In contrast to real estate, each of the narrow stock categories introduced in the worksheet on page 90 are represented in the model portfolios. While high-grade bonds and cash investments tend to move in lockstep, different sectors of the stock market follow their own ups and downs. For instance, aggressive stocks, especially those of swiftly growing small companies, have appreciated faster than blue chips by an average of 1.7 percentage points annually over the past 66 years, including a sizzling 44.6% gain last year. Between 1984 and 1990, however, it was the blue chips that did the heavy lifting, returning 14.6% annually while the little guys gained just 2.6% a year. Similarly, income stocks had their day in 1981, when they gained 5.9% as the market lost 5.1%. And foreign equities set the pace for all stock investments from 1984 to 1988 as a falling dollar and strong overseas markets helped produce average annual gains of 35.8% on international portfolios. If you are just starting your push toward financial security, the box above will help you build a portfolio with only a few thousand dollars. And whatever the size of your holdings, the table on page 115 will help you select promising specific investments in each of the asset classes. But as you work to put together a portfolio that propels you safely and rapidly toward financial security, keep the following guidelines in mind: First, get rid of any unnecessary debt. Obviously it makes no sense to put money away in an investment portfolio that you hope will earn 10% to 15% and at the same time to carry a balance on a credit card that charges 19%. Loans to purchase an appreciating asset, such as a mortgage on your house or a margin loan to buy promising stocks, can help advance you toward your goals, as long as the assets' appreciation outpaces the interest charges. But loans that fuel idle spending -- like a credit-card advance to bankroll a vacation -- only impede your progress toward financial security. Your first investment move should be to pay them off and put credit-card borrowing behind you. Make tax-deferred accounts part of your overall strategy. Too often investors think of their IRAs and 401(k)s as separate from their other investments. That's a mistake. ''Your tax-deferred and taxable accounts all work toward the same end,'' says Norman Boone, a financial planner with Associated Planners Securities in San Francisco. ''You should view them as all part of the same pie when you decide how to allocate your money.'' Once you've set your overall allocations, figure out what portion of your savings you want to devote to your 401(k) or deductible IRA, keeping in mind that you won't be able to tap these accounts before age 59 1/2 without paying a penalty. Then fill these tax-deferred accounts with the investments that would otherwise produce the biggest tax bill, such as bonds or even aggressive growth stock funds that are likely to throw off lots of taxable capital gains. That way you can make the best use of the account's tax advantages. For example, if your portfolio consisted of high-grade bonds, blue-chip equities and cash, put the bonds into the tax-deferred accounts first; and if the bonds alone don't push you over the accounts' contribution limits, add the blue-chip stocks or funds next. Review your portfolio twice a year. Even a well-constructed portfolio will require periodic readjustment as rising and falling markets gradually alter your mix of assets. ''If one category gets more than 5% out of line with your investment range, you should think seriously about realigning your portfolio,'' says Robert McLeod, a professor of finance at the University of Alabama. That brings your portfolio back to your chosen risk level and, as a bonus, forces you to sell overvalued investments and buy undervalued ones. And, of course, if nothing needs fixing at your six-month checkup, all you have to do is sit back and watch the green stuff grow.

CHART: NOT AVAILABLE CREDIT: Tables and worksheets by Baie Netzer and Ruth Simon CAPTION: How much do you need to retire? Calculating savings required for a comfortable income Before you can feel financially secure, you have to be sure that you'll be able to maintain your standard of living in retirement. Unless you have unusually high expenses now -- college bills for a child, for example -- you'll need around 80% of your current income. Social Security and a defined-benefit pension can cover part of that. Such benefits typically provide 40% of your current salary if you have worked for a large corporation for at least 15 years, and as much as 60% after 35 years, according to the Wyatt Co., a benefits consulting firm. The remainder will have to come from your savings. This worksheet will give you a rough gauge of how much you will need; all figures are in today's dollars. For exact projections of retirement benefits, call the Social Security Administration at 800-772-1213 and ask an employee-benefits counselor about your pension. The worksheet assumes that you earn a 3% return after inflation and taxes and live another 20 years after quitting work at age 65. If you want to retire earlier, of course, you will need larger savings

CHART: NOT AVAILABLE CREDIT: Tables and worksheets by Baie Netzer and Ruth Simon CAPTION: How big is your appetite for risk in investing? Risk quiz Are you bold or sensible? Competitive or cautious? It's easy to misjudge your tolerance for risk when it comes to investing. To determine your investment risk threshold, take the quiz at right, developed with the help of psychologist John O'Leary, co-director of Lifecycle Testing in New York City. Then choose the mix of investments that is right for you after consulting the recommended portfolio allocations on page 112.

CHART: NOT AVAILABLE CREDIT: Tables and worksheets by Baie Netzer and Ruth Simon CAPTION: Getting the right mix of assets Model portfolios These three charts show how aggressive, moderate and cautious investors might divvy up their investments. Use your score on the risk quiz on page 110 to find the portfolio model that's best for you. Assuming that markets behave more or less in line with their historical norms, you can expect the low-risk portfolio to return an average of about 10% a year over the next 10 years with a loss of no more than 4% in its worst year. The moderate-risk portfolio figures to return about 12% annually with a worst-year loss of 6%, and the high-risk portfolio could hit 15% a year with a 15% maximum loss. The portfolios were prepared with the assistance of William Droms, a professor of finance at Georgetown University's School of Business Administration.

CHART: NOT AVAILABLE CREDIT: Tables and worksheets by Baie Netzer and Ruth Simon Sources: Bank Rate Monitor, IBC/Donoghue's Money Fund Report, Lynch Muncipal Bond Advisory, Morningstar, Standard & Poor's, Value Line Investment Survey, Veribanc CAPTION: Putting together a portfolio for a secure future 50 top investment picks In compiling this list of leading investments, MONEY reviewed recommendations from a dozen leading analysts. Because we emphasized safety, the only individual issues cited are low-risk stocks and bonds; if you want more volatile securities, it is generally best to buy them through professionally managed mutual funds. All the stocks here have at least an A+ financial safety grade from Value Line. The blue chips are rated above average for long-term performance by Value Line and Standard & Poor's and are ranked by projected earnings growth. Income stocks are ranked by current dividend yield. The equity mutual funds all get high marks in their categories from Morningstar, a fund-rating company. Funds are ranked by their total returns for the past 12 months. We limited our individual bond choices to Treasury issues and so-called pre- refunded municipals that are backed by Treasuries; these picks are given in order of their recent yields. The bond funds, rated above average by Morningstar, are listed by total return. Our selection of top-paying cash investments includes certificates of deposit issued by banks highly rated by Veribanc, a firm that assesses bank safety. (For additional choices, see Banking Scorecard on page 23.) For money- market funds, Walter Frank, chief economist at the fund newsletter publisher IBC/Donoghue's, chooses those that invest in high-grade maturities of 70 days or less.