Q: Concern over the stability of the stock market has prevented me from reinvesting cashed out stock funds. These funds have been sitting in a money market account for three years earning very little interest. How do you suggest I split the focus of the reinvested funds?

A: It depends. (You had a feeling I might say that, didn’t you?) I get asked this question a lot and I wish the answer were simple enough that I could address it in the An$wer of the Month column. Unfortunately, there really isn't a simple answer to this question. Why is that??

Well, the reason is that various types of investments have very different characteristics and decisions about what to invest in need to be based on your particular situation:

• what you intend to use the money for & when,
• other personal financial goals & constraints,
• what else is in your portfolio,
• your ability to withstand fluctuations in the portfolio’s value,
• your tax situation,
• and a host of other factors that make up your complete financial picture.

The thing is: everyone’s particular situation is different. For example, the answer to this question would be completely different if you told me you were planning to use the money for a major home improvement in 1 year vs. if you told me you are planning to use it to fund retirement in 20 years. But the answer can vary considerably even for 2 families who look pretty similar on the surface. You might think that I’d recommend the same thing for 2 dual-income, no-kids couples who anticipate retiring in 30 years or so. But if one couple plans to have children and intends to help pay for their college education, the picture changes and so might the answer to the question.

A corollary to this question is: “Is mutual fund XYZ or stock ABC a good investment?” The right question to ask is “Is mutual fund XYZ or stock ABC a good investment for me?” Sure, there are some investments that are bad for just about everybody, but there aren’t any that are always good for every situation.

An analogy comes to mind… After some recent landscaping work, we ended up with an unexpected new flower bed in the middle of the front lawn. It looks pretty silly sitting there empty, and I’d love to be able to just get on the phone to Grandma Bea, the family’s award-winning gardener, and ask “What trees/shrubs/flowers should I plant in this new garden?" But she lives 300 miles away and she’s not really familiar with the sun, soil, existing plantings, slope of the yard, etc. Without more insight into the situation, Grandma Bea would be taking a big risk making a recommendation. I’m sure she wouldn’t want to feel responsible for a rose that never blooms, a yew that blocks the best view, or a perennial that isn’t.

And so it is with investment recommendations. Without in-depth knowledge of the landscape, it’s awfully hard to give advice that doesn’t wilt.