Keeping it simple

- Alan Lavine and Gail Liberman

If you're the type of investor that likes to keep it simple, all you need is one or two funds.

You can invest in a balanced fund that typically keeps 60 percent in stocks and 40 percent in bonds.

Or, you can invest one-half of your money in one stock fund and one-half of your money in one bond fund. This is a better alternative because you can adjust the amounts in each. Plus, with two funds you can engage in some easy-to-use investment strategies.

The younger you are, the more you can invest in stocks. You have plenty of time to make back any losses. One rule of thumb: Subtract you age from 100. The result gives you a bench mark of about how much you should invest in stocks. Say you're age 30: You can invest 70 percent in stocks. If you're 70 years-old, you probably don't want to keep more than 30 percent of your money in stocks.

Even senior citizens need to have some money in stocks. The reason: Stocks help the value of your nest egg increase at least with the rate of inflation.

Here are just a few easy-to-use investment tactics when you own a stock and bond fund:

• Portfolio rebalancing. You keep the same percentage in your stock fund and bond fund every year. That way, you take profits in the over-performing fund and invest in the underperforming fund to keep the same percentage mix.

• Constant dollar investing. You decide on an amount you want your stock fund to be worth at the end of each year. Say you want your stock fund to be worth $150 at the end of the first year. If the stock fund is above that value, you take profits and put it in your bond fund. But if the stock fund is down in value, you take money out of the bond fund and put it in the stock fund. So in our example, if the stock fund, at the end of the first year, is worth $160, you would withdraw $10 and put it in the bond fund.

What mutual funds should you use?

It's usually best to stick with no-load mutual funds that charge no upfront, back-end or ongoing fees. You can purchase these directly from the mutual fund company or though a discount brokerage firm.

Consider investing in index funds that track the Standard and Poor's 500 and the Lehman Brothers Bond Index. Index funds offered by Vanguard Group, for example, are among the lowest-cost funds in mutual fund land.

What if you like actively managed funds? Consider investing with major no-load fund groups like Fidelity Investments, T. Rowe Price and Vanguard. These investment companies offer a large selection of funds.

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Alan Lavine and Gail Liberman are husband and wife columnist and authors of The Complete Idiot's Guide To Making Money With Mutual Funds, (Alpha Books). Al and Gail's new book is Rags to Retirement, (Alpha Books).