(MONEY Magazine) – As the architect of your investment portfolio, you want to design a structure for your finances that sturdily supports your family's needs. Your building blocks, whether you are laying out the first floor of a new portfolio or adding another level to a tower of assets, are $1,000 bricks of cash. Deploying your money by the grand makes sense for several reasons. To start with, you need at least $1,000 for most investments. Yet $1,000 is a small enough sum so that you can risk putting all of it in one investment, even when the stock and bond markets are as jumpy as they have recently been. What's more, the very roundness of the figure will remind you to move savings of that size from your low-interest bank account to a more productive place. Where to put your next $1,000 hinges mainly on your financial objectives, your net worth, the amount of risk you are willing to accept and the types of investments you already own. For goals close at hand, focus on investments that will preserve what you have already saved. The same is true if your net worth is low -- say, $15,000 or less. But the larger your portfolio and the longer term your dreams, the more risk you can take for big gains without getting hurt permanently if the investment suffers a setback. Your psyche matters too. Never put your money in anything too fickle for your nervous system. Like a mason who lays his bricks with an eye toward balance, you should diversify your holdings so that one misplaced investment won't bury your entire portfolio. However irrepressible your investment machismo, now seems to be a time for caution. The bearish grunts ominously echoing down Wall Street make stocks scarier than they have been in five years. Springtime interest-rate increases, spurred by inflation worries and the dollar's spill, also make bonds seem perilous. Says John Connolly, chairman of Dean Witter's investment policy committee: ''Until the bond market reaches its bottom -- and I don't see that happening yet -- the stock market will continue to fall. The Dow could easily end up below 2000.'' Your next thousand, wherever you decide to invest it, will fit nicely -- and compound in full -- in an Individual Retirement Account. Your earnings there won't be taxed until you withdraw the money, presumably after you stop working. That continues to be true even if membership in a pension plan and wages of $50,000 or more ($35,000 for singles) disqualify you from deducting any of your IRA contribution. The best way to sort out your manifold investment choices is by risk and return. The investment targets that follow give you bull's-eyes to shoot at for different levels of risk over short, intermediate and long time spans.

LOW-RISK TARGETS $1,150 in two years $1,400 in five years $2,000 in 10 years

Foremost among the safe places to park your cash are money-market accounts offered by banks and money-market mutual funds. Taxable funds, recently yielding an average of 5.9%, earn you slightly higher returns than bank accounts, which have generally been paying around 5.5%. Money-market accounts have the advantage of being federally insured up to $100,000. Investor's Scorecard (page 30) lists banks offering the best money-market yields, which range up to 7%. Because money funds invest in the shortest-term borrowings of the Treasury, banks and businesses with high credit ratings, there's no real danger of missing interest payments or losing your principal. If interest rates climb, your return will soon increase. You may be better off, though, in a tax-exempt money fund than in a taxable account. Tax-exempt money funds, which invest in short-term paper issued by municipalities, were recently yielding an average of 4.7%, making them better than a break-even proposition for investors in the 28% bracket and definitely the fund of choice for someone paying 35% or more. At a tax rate of 28%, a 4.7% tax-free return is the same as 6.5% taxable. In 1987, couples with taxable incomes over $28,000 and singles over $16,800 -- levels you could reach on gross incomes as low as $36,000 and $22,000 -- will pay a tax rate of 28% or more. Residents of states with their own high income tax, such as California, New York and Massachusetts, can invest in money funds that are exempt from state as well as federal taxes. The highest-yielding money funds appear in Investor's Scorecard. To decide between taxable and tax-free funds, compare the highest-yielding entries that belong to fund families whose stock and bond funds you own or might be interested in buying. Then divide the yield on the tax-free fund by the difference between 1 and the decimal form of your tax bracket (1 minus 0.28 equals 0.72, for example). If that quotient is higher than the return on the taxable fund, choose the tax-exempt investment. Your $1,000 can earn a bit more in a short-term bank certificate of deposit and a lot more in a long-term CD than in a money-market account or fund. But you cannot withdraw the money before the CD matures without giving up most of the extra yield. Investor's Scorecard lists the highest-yielding CDs, ranging from 8.2% on six-month CDs to 9.5% on five-year CDs. Robert Heady, publisher of the 100 Highest Yields newsletter (P.O. Box 088888, North Palm Beach, Fla. 33408; $84 a year), recommends that investors stick with three-month and six- month CDs for now. If you lock money in longer-term certificates, you risk missing out on higher yields later on. Chase Manhattan Bank recently unveiled a CD for risk-takers. This account, with a minimum investment of $1,000, bases its return on the performance of the stock market. Your principal is guaranteed and government insured up to $100,000, but the interest you receive is pegged to Standard & Poor's 500- stock index. You decide how much of your return you want tied to the index and how much of it you want to get at a fixed return. Your options start at a guaranteed 4% yield or a small portion of the percentage increase in the S&P, whichever is greater. At the other extreme, you can accept no guaranteed return but a higher share of the gain in the index. This investment, called the Chase Market Index Investment, makes sense for querulous bulls who don't want to risk any of their $1,000 on their market convictions. At current interest rates, stocks will have to rise about 10% before the one-year Chase Market Index CD pays more than a fixed-rate CD. You can buy these securities by mail by calling 800-245-1032. Another cautious way to improve on money-market yields is to invest in a short-term bond fund. Gerald Perritt, editor of the Mutual Fund Letter (205 W. Wacker Dr., Chicago, Ill. 60606; $115 a year), suggests 20th Century U.S. Government Securities (no load; 800-345-2021, 816-531-5575 in Missouri), yielding 8.2%, and T. Rowe Price Short-Term Bond Fund (800-638-5660, 301-547-2308 in Maryland), yielding 7.4%. Because the average maturity of the bonds in both funds is less than three years, a full percentage point increase in interest rates would still leave you with a return comparable to a money fund's. If rates don't rise, you obviously will be better off in the bond fund. Further, its yield would gradually catch up to prevailing interest rates. For a minimum of only $25, you can invest in Series EE U.S. Savings Bonds, whose yield is adjusted every six months. The rate is tied to the yield on five-year Treasuries and is currently 5.84%. But if you hold an EE bond five years or more, you are guaranteed 6%. The interest is exempt from state and local income tax, and federal taxes are deferred until you redeem the bond. Savings bonds are most suitable for money transferred to a child under the Uniform Gifts to Minors Act. The first $500 of interest is tax-free. All further income that a child 14 or older receives will be taxed at the youngster's rate, usually no more than 15%, rather than yours. But this tax break is lost on younger kids. Their investment earnings in excess of $1,000 are taxed at your rate. By deferring income with savings bonds, you can make sure none of the interest will be taxed until your child is 14.

MODERATE-RISK TARGETS $1,250 in two years $1,800 in five years $3,100 in 10 years

If you are willing to risk losing some of your $1,000 in hopes of somewhat higher returns but feel wishy-washy about stocks and bonds right now, you still have several other options. One is to invest in a mutual fund that puts its eggs in several different baskets -- a so-called asset allocation fund. One such fund that accepts a $1,000 minimum investment and imposes no sales charge or unusual fees is USAA Cornerstone (800-531-8000). Cornerstone's assets are divided more or less equally into five types of investments: U.S. stocks, foreign stocks, real estate, government bonds and shares of gold mines outside South Africa. Even though Cornerstone is likely to underperform the stock market over time, it has posted an impressive 28.9% average annual return since it opened 2 1/2 years ago. Two similar funds with $1,000 minimums are Permanent Portfolio (800-531-5142, 512-453-7558 in Texas), which has a $35 one-time start-up charge and an $18 annual fee, and Paine Webber Asset Allocation (800-828-6109, which has a declining back-end load that starts at 5% the first year and disappears after seven years). A quasar in the small galaxy of asset allocation funds is Vanguard Star (no load; 800-662-7447), which grew 12.4% over the past year. It invests 60% to 70% of its assets in other Vanguard stock funds and 30% to 40% in the firm's fixed-income funds. You can also cushion yourself against stock and bond market losses by investing in total-return mutual funds. They come in two types: balanced funds, which get their growth mainly from stocks and their income from bonds, and growth and income funds, which invest mostly in conservative stocks that pay ample dividends. Going on past performance, Sheldon Jacobs, editor of the No-Load Fund Investor newsletter (P.O. Box 283, Hastings-on-Hudson, N.Y. 10706; $82 a year), recommends Loomis-Sayles Mutual (800-345-4048, 617-578-4200 in Massachusetts) and Axe-Houghton Fund B (800-431-1030, 914-631-8131 in New York), which are balanced funds. Growth and income funds with high long-term returns include Eaton Vance Total Return (4 3/4% load; 800-225-6265, 617-482-8260 in Massachusetts) and Sentinel Common Stock (8 1/2% load; 800-233-4332, 802-229-3900 in Vermont). Funds that hunt for undervalued, out-of-favor stocks also tend to hold up well during downturns while managing to post goodly results when things go right. Two value-oriented no-load funds with impressive performance records are Janus Value (800-525-3713, 303-333-3863 in Colorado) and Neuberger & Berman Partners (800-237-1413). Income-oriented investors who can take moderate risks should consider funds that invest in Ginnie Maes and other mortgage-backed securities. They are currently paying high but volatile yields of 9% to 11% but behave best when interest rates are more constant. When rates rise, mortgage-backed securities lose value just as bonds do. When rates drop, causing many homeowners to refinance their mortgages, the fund managers have to reinvest the returned principal at lower yields. See Fund Watch (page 38) for the best-performing mortgage-backed security funds, most of which have minimums of $1,000 or less.

HIGH-RISK TARGETS $1,400 in two years $2,300 in five years $5,200 in 10 years

It's especially difficult to make a big killing in a five-year-old bull market that may well be facing its final veronica. But one opportunity lies in stocks of small companies (those with outstanding shares worth less than $100 million). While the run-up in the stock market has done wonders for larger, blue-chip stocks, Gerald Perritt believes diminutive companies are undervalued. Stocks with low market capitalization usually have price/earnings ratios 30% to 50% higher than that of the market as a whole, but their average P/E now is almost the same as the S&P's. Small stocks generally take a beating during downturns. Even so, Perritt thinks they will hold up well this time around. And if the market moves up, you may get a real joyride. Two mutual funds best poised to benefit, in Perritt's view, are Royce Value (1% back-end load for the first five years; 800-221-4268, 212-355-7311 in New York) and Babson Enterprise (no load; 800-821-5591, 816-471-5200 in Missouri). Since many small-company stocks trade below $10 a share, you can buy them in round lots of 100 shares with your next $1,000. (Buying fewer than 100 shares of any stock costs you higher brokerage commissions.) But consider low-priced stocks only if you already own a well-diversified portfolio. Andrew Addison, publisher of the Addison Report (P.O. Box 402, Franklin, Mass. 02038; $140 a year), recommends Genesco (recently traded on the New York Stock Exchange at $4.75 a share), a manufacturer and retailer of clothing and shoes. Overstocked inventories and debilitating debts dropped the share price to a low of $2.75 a year ago, when new management took over. Since then, Genesco has sold its unprofitable Canadian operations and regained control of its inventories, positioning it for continued earnings growth, in Addison's opinion. Another low-priced stock, American Integrity Insurance (recently traded over the counter at $6), appeals to George Putnam, editor of the Turnaround Letter (1528 Walnut St., Philadelphia, Pa. 19102; $195 a year). American Integrity, selling health and accident insurance to the elderly, had to boost its revenues because of high claims last fall. That cut profits and dropped the stock from $17 to $4.75. The number of policies the firm is selling remains impressive and Putnam predicts an earnings rebound. Norman Fosback, editor of Market Logic (3471 N. Federal Hwy., Fort Lauderdale, Fla. 33306; $95 a year), recommends Stuart's Department Stores (OTC, $6.50). This New England retail chain expanded too quickly and was mired in surplus inventories a year ago, knocking 60% off the stock price. Now, though, Fosback sees earnings moving up again. He also likes Bermuda Star Line (American Stock Exchange, $6), a three-ship company that recently went public. If tourism continues to steam ahead as Fosback anticipates, the firm should sail smoothly.

Then there is gold. Although its ups and downs can give you motion sickness, gold ought to be 5% to 10% of a portfolio worth $30,000 or more. The price per ounce tends to surge when stocks and bonds swoon from intimations of renewed inflation. Therefore, gold can act as a hedge against your other holdings. Your next $1,000 will nicely cover the cost of two newly minted one-ounce coins at the metal's recent price of $450, plus markups and storage. Or you can invest in a mutual fund that owns shares of gold-mining companies. Bill Rouleau, co-editor of the Growth Fund Guide (Growth Fund Research, Box 6600, Rapid City, S.D. 57709; $85 a year), recommends two no-load funds: Lexington Goldfund (800-526-0056) and Financial Strategic Portfolio-Gold (800-525-8085, 800-525-9769 in Colorado). The highest rewards for courage now may come from foreign bond funds. They perform best when the dollar's value falls in relation to the currencies of the countries whose bonds they hold. Prices of foreign bonds, like all bonds, rise when interest rates fall, which they are more likely to do in some countries than in others. Also, since some yields overseas, most notably in Australia and New Zealand, are higher than in the U.S., bonds from those places are more enticing than domestic debt. The only foreign bond fund that has been in action longer than a year is Massachusetts Financial International Trust-Bond Portfolio (7.25% load; 800-343-2829, 617-423-3500 in Massachusetts), posting an average annual return of 18% in its six years of operation. Two other funds that own foreign bonds are T. Rowe Price International Bond Fund (no load; 800-638-5660) and Merrill Lynch Retirement Global Bond Fund (4% back-end load; 609-282-2800). Because the performance of foreign bond funds depends on currency fluctuations as well as interest-rate movements, fasten your seat belt: your trip overseas may be bouncy.