The key to investing well is to assemble a well-diversified portfolio appropriate to your time horizon -- and stick with it. We'll help you get started. May 31, 2007 With the Kiplinger 25, we identify the best stock and bond funds available. But to meet your goals, you need a plan. Too many investors end up chasing hot sectors or exiting cold ones with exquisite mistiming. To avoid these mistakes, know where you're going. Ask yourself why you're investing your hard-earned money and what your time horizon is. Start with allocation, which will probably be more important to your investment performance than the actual stocks, bonds and funds you purchase. Generally speaking, the longer your investment horizon, the more you can salt away in stocks, which are more volatile than bonds but return more over extended periods of time. RELATED LINKS Read About the Kiplinger 25 Suggested Portfolios Using the Kiplinger 25 Fund Rankings by Performance Visit Our Mutual Fund Center You can dampen some of the volatility inherent in an aggressive stock portfolio through diversification. For example, value and growth stocks tend to move out of sync. In recent years, value has dominated, but the pendulum will eventually swing back to growth. Don't try to predict the market. Hold both value and growth in your portfolio. Likewise, you should keep a slice of your portfolio in funds that invest in small and midsize companies, which often move in a different cycle than large-company stocks. In recent years, the gains of small-company stocks have outpaced those of their larger brethren, but many market prognosticators say that this pattern is unlikely to continue much longer. You should hold funds in both categories. For this year's suggested portfolios, we've bumped up our recommended allocation to international stocks. There's a big world out there, and it's full of investment opportunities. Economic growth in emerging markets is much higher than in the U.S., and the value of the dollar is eroding (money invested in foreign currencies gets translated into more dollars when the greenback depreciates). Overall, we suggest placing 25% to 30% of assets dedicated to stocks in foreign stock funds, even though this category has surged in recent years. We recommend about 25% in small and midsize stock funds and the balance in funds that invest in big companies. Advertisement Remember that investing in the terrific funds that make up the Kiplinger 25 is only part of the equation. You'll also need a sound allocation plan, a disciplined mind-set and maybe some ice in your veins to keep your nerves calm during the inevitable jumpy market periods. And don't forget to rebalance your portfolio at least once a year, and perhaps as often as once a quarter, particularly when a fund or an asset class performs exceptionally well or exceptionally poorly. See our suggested portfolios for long-term, mid-term and short-term goals.