How to Deploy a Big Cash Stake (part 1)
A retired couple plots a strategy for getting back into the market.

They're both in their late 60s. Janet is a homemaker, while Bob is an engineer who still provides part-time consulting services for his former employer. They have three grown children, all of whom have left the nest and are financially stable. Bob and Janet are both in generally good health. The couple is concerned that, with a too-tame investment mix, their portfolio may not last through what they expect to be a long and fruitful retirement.

Investors can end up with big cash stakes for a variety of reasons. Receiving an inheritance or some other financial windfall is one of the most common triggers. Bob and Janet wound up with a lot of cash for a different--but perhaps no less common--reason.

Up until early 2008, the pair had roughly three fourths of their assets in stocks with the rest in cash and bonds. But as the subprime crisis worsened and stocks headed south in the first quarter, Bob got nervous about the toll that market turmoil was taking on the pair's assets. He shifted much of the couple's equity holdings into cash and retained only the natural-resources and emerging-markets funds that were holding up well at that time. As the couple's remaining stock funds got roughed up, Bob became paralyzed with indecision.

Bob and Janet's Portfolio: Before
	Star Rating	Category	Holding Value	Expense Ratio ( % )
iShares FTSE/Xinhua China 25 Index (FXI )		Pacific/Asia ex-Japan	67,317	0.74
iShares S&P Latin America 40 Index (ILF )		Latin America Stock	92,108	0.50
Loomis Sayles Bond (LSBRX )		Multisector Bond	276,534	0.97
Cash			843,072
Total			1,279,031

As a result, Bob and Janet's portfolio currently has a schizophrenic look. On the one hand, they have small positions in some very aggressive region-specific holdings, which slid substantially during 2008 but have mounted a comeback recently. Meanwhile, the bulk of their portfolio is parked in cash and bonds.

The pair would like to know whether they should hang on to their niche stock funds. At the same time, they'd like to invest their cash so that they can obtain some growth. Another goal for Bob is to create a stable portfolio that he can live with through a variety of market environments. He's been an active trader for much of his investing career but acknowledges that he's had mixed success. In the future, he'd like to spend more time on relaxation than portfolio management, and he'd also like to worry less.

Bob and Janet's Portfolio: After
	Star Rating	Category	Holding Value	Expense Ratio ( % )
Dodge & Cox Stock (DODGX )		Large Value	300,000	0.52
Vanguard Primecap Core (VPCCX )		Large Growth	220,000	0.55
Masters' Select Smaller Companies (MSSFX )		Small Growth	85,000	1.31
Tweedy, Browne Global Value (TBGVX )		Foreign Sm/Mid-Value	100,000	1.37
Vanguard Total Intl Stock Index (VGTSX )		Foreign Large Blend	50,000	0.27
Metropolitan West Total Ret Bond (MWTRX )		Int-Term Bond	250,000	0.65
Loomis Sayles Bond (LSBRX )		Multisector Bond	100,000	0.97
Vanguard Short-Term Bond Index (VBISX )		Short-Term Bond	100,000	0.18
Cash			74,031
Total			1,279,031

to be continued.