(MONEY Magazine) – Q. I'm perplexed about how to balance my portfolio between income-producing and growth investments. One approach is to have the percentage in bonds equal to my age. Another says to allocate the money according to my future need for it. I like that, but what do you say? DICK BALDWIN NORTH CHELMSFORD, MASS.

A. The nearer the need for thy money be to thee, the more conservatively shalt thou invest. That's the 11th commandment, which restates the old saw about keeping the percentage of your portfolio in bonds equal to your age. Presumably, your time of greatest need will occur in retirement when you must live off your investments; so the rule makes rough sense. Alas, the rule doesn't allow for any market timing, and just as you reach age 65, bonds could go down the toilet. So I say this is one rule you can disobey.

The other approach is a model devised by Jack Bowers, editor of the Fidelity Monitor newsletter (800-397-3094). In my opinion, it's a logical but overly fussy variation on the age rule. It asks you to determine your spending needs for three different time frames--the next three years, three to eight years, and eight years or more--and then to invest accordingly.

For the short term, play it safe with U.S. Government, municipal and corporate bond funds--remember the 11th commandment. For the intermediate period, growth and income funds, utility-stock funds, and junk bond and foreign bond funds. For the long term, growth-stock funds are your best chance to beat inflation, and since you don't need the money for at least eight years, they're worth the risk.

Figuring out what proportion of your dollars goes into what category is where the fussy part comes in. For each period, compare your estimated expenses with your regular income, including wages, pension, Social Security and the like. If expenses exceed your income in any period, you will need investment income to make up the difference. Say that, overall, you have a $100,000 shortfall, with $50,000 being needed in the next three years and $50,000 in six years or so. That means half of your investment dollars should go into the funds in the three-year category and half into the intermediate category. Put any surplus into stock funds.

Conversely, if you do not need investment income for the first eight years, put all your money in long-term growth funds and convert to income investments only when you start requiring cash. Rebalance your portfolio periodically. Bowers also advises you to temper all your choices with your tolerance for risk. If you're the uptight type, for example, use the most conservative investment vehicle in each category.

His model will probably work well for people who try to map out their futures as precisely as the old Soviet Union bureaucrats did with five-year plans. For those who don't, can't or won't, Bowers offers another option. Put everything in growth and income mutual funds and hope for the best. I say amen to that.

Q. My mom is 50 and a single mother. She would like to retire someday and needs help figuring out how she can start saving more. Unfortunately, she lost her $33,000-a-year job as an office manager when the company closed last December. Her new job pays only $25,000, but it does offer a defined-benefit pension plan. Her monthly take-home of $1,500 a month plus $300 a month from a lodger are just enough to cover her expenses.

She's also thinking of moving to Florida in the next year or so to be with relatives. Mom owns a condo here, and after she pays off her 9.5% mortgage and an 11.67% second mortgage, she would have about $20,000 in equity to finance her move south. Besides the potential equity, she has only $2,000 in savings. But she also has credit-card debt of $5,000. What can she do? KRIS KENNEDY DES MOINES

A. Here's what your mother must do. First, postpone her plans to move to Florida unless she's sure she can land a higher-paying job there. Otherwise, she will use up the profits from her condo on moving and keeping body and soul together while she seeks work. Second, consolidate her two mortgages into one loan. With today's low interest rates, refinancing may free up $100 or $200 a month for savings. But watch out for closing costs.

Finally, she must generate more money for retirement. A better-paying job would help, but I like the fact that her current job offers a guaranteed pension. In the meantime, she needs to take a second job and use the extra money to pay off her credit-card debt and then build up her savings. (By the way, she might also consider transferring her credit-card balance to a card with a lower interest rate than she's now paying.) If she could start an after-hours business--say, in word processing or bookkeeping--then she could open a Keogh plan that would allow her to put aside as much as a fifth of those earnings in a tax-deferred retirement account.

This is all pretty tough for someone who has probably worked like a hound her whole life. Fortunately, your mom is still pretty young (by my standards, anyway) and has plenty of time to get it together.

Q. I recently invested in several pieces of jewelry from ancient Egypt, Greece, Rome and Persia. The dealer, Sadigh Gallery in New York, guaranteed that the pieces dated from as early as 600 B.C. to 100 B.C. I paid from $50 to $300 for each. Do these items appreciate, and can I expect a decent return? SCOTT ANDERSON GILBERT, ARIZ.

A. Scott, "Tut, tut!"--and I'm not talking about the pharaoh. These are the questions you should have asked before you bought the stuff. Michael Sadigh, the owner of the gallery, tells us that all the items you purchased are from the tombs of commoners and are probably of little interest to serious collectors. However, they come from areas of the world where there are tough restrictions on the export of antiquities. That means that what's already in this country is pretty much all there is when it comes to ancient gewgaws. So in theory at least, your jewelry may appreciate if you enjoy a long life.

In any event, you should have your things appraised by an expert to get a fix on their value. Send photos, measurements and copies of your documentation to the antiquities department at Christie's Auction House (502 Park Ave., New York, N.Y. 10022) or Sotheby's Auction House (1334 York Ave., New York, N.Y. 10021.)

Q. I purchased what I thought was a variable annuity in 1989 from Prudential Insurance. My husband purchased the same "annuity" in 1991. When my husband and I talked to our sales agent, we always referred to the product as an annuity and he never corrected us. In September 1994, our new agent told us that in fact we owned variable life insurance policies, not annuities. Prudential says the prospectus clearly said that what we had was insurance, and the Illinois Department of Insurance backed up the company. Is there anything I can do? Should we bail out? If we do, what happens to the $33,000 we thought we invested in our annuity's aggressive stock investment account? KAREN A. DANIEL CAROL STREAM, ILL.

A. Here's a case of Money Helps to the rescue. After reporter Barbara Solomon called Prudential to ask what it would cost you to get out of the policy, the company agreed "in the spirit of compromise," as an executive who prefers anonymity put it, to cancel your life insurance policy and use the total premiums you paid to purchase two variable life annuities. Insurance companies are very sensitive to accusations of misleading their customers, particularly since Metropolitan Life was cited by Florida insurance regulators last year for peddling whole life policies as retirement plans.

The Prudential exec told us that the company would also credit you with the earnings you would have had if you had chosen your annuity's fixed-rate investment account. That account has earned 8.5% a year since 1989. By contrast, the variable-annuity aggressive stock account into which you thought you were putting your money has returned 10.8% annually over the same period. So to make the switch to the annuities you wanted in the first place, you're going to be out about $500, a cost I think you will have to bear for not being cautious enough to read your original prospectuses.

Reporter associate: Barbara Solomon

Money also answers your financial questions on Cable News Network's Your Money Saturdays at 3:30 p.m. and Sundays at 9:30 a.m. eastern time. Send your question, plus your name, address and phone number, to: Money Helps Time & Life Building, Rockefeller Center New York, N.Y. 10020

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