Q. It is time for the annual rebalancing of my portfolio. Two of my funds, Vanguard Precious Metals and Mining (ticker: VGPMX) and Vanguard Energy (ticker: VGENX), have made 50 percent over the last year. Does it make sense to take the profits in these funds, reducing them to their original percentage allocation, and to put the profits in a tax-exempt money market fund? I would leave the money there until the present market volatility and decline is thought to have run its course. Then I would take these preserved profits and rebalance at that time.
---K. F., by email from Bryan, Texas

A. Vanguard Precious Metals and Mining (ticker: VGPMX) and Vanguard Energy (ticker: VGENX) have both produced outstanding returns over the last year, three-year, and five-year periods--- so some rebalancing is in order. The returns weren’t, however, quite as rich as the 50 percent you cite. Vanguard Precious Metals returned 31.1 percent for 2007, while Vanguard Energy returned 37 percent.

Selling down to their original percentage allocation and putting the cash in a money market fund, however, is not the same as rebalancing. By putting the money in cash, you are choosing to reduce the risk in your portfolio.

That’s not the same as rebalancing to your original allocation and risk level.

If your circumstances (or your risk tolerance) have changed, then put the liberated cash in a money market fund. Otherwise, rebalance.

Lots of people, by the way, share your concern. It appears that volatility is back, big time. So a portfolio that seemed to have a tolerable amount of risk three years ago may be intolerably volatile (and risky) today. In the end, you’ll need to ask your stomach.

Q. You have written that you do not believe target funds may be a good choice (or words to that effect).  I have a planner who advised me to use Vanguard Target 2025 for a small amount that I have in a Roth IRA account.  Since she felt there was not enough money to diversify to any large degree ($28,000) in a number of funds, she said this would be a diversification within one fund.  I am 72 years old. I think she has a good idea here.  I am well-diversified in my taxable and IRA accounts and will probably never touch this account.  Your thoughts?
---A.R., by email

A. Yes, that’s a good idea. It works because you aren’t likely to access the money, and it can grow without tax liability. If you think of it as money intended for your heirs, the current 80 percent commitment to equities is a good idea for future growth. Better still, the risk will automatically diminish as you age, and the odds of a transfer will increase.

In this instance, the structure of a target portfolio suits your individual purposes very nicely. The reason you haven’t seen enthusiasm for target-date funds in this column is that it isn’t always a good idea to reduce equity commitment as one ages. Yet that is the underlying premise of all these funds.

Q. I have a daughter who will be turning 21 in a few months. She lives in New York.  She will be coming into about $40,000.  I have been told that land in Florida has been reduced in price due to the market.  Do you think it would be a wise long-term investment for her to purchase land in Florida? If so, what area would you recommend? 
---S. V., by e-mail

A. This is not a good idea. Not because the land is in Florida. It is a bad idea because you are contemplating an investment in an illiquid asset that costs money to hold since it will require paying real estate taxes.

Your daughter is facing a major period of uncertainty in her life--- establishing a career, possibly getting married, perhaps buying a house. She may also be moving several times. That means her assets should be in things that are easy to sell, if necessary. Still more important, her assets should be salable in small portions. That isn’t land, which doesn’t come in shares.

As an alternative, I suggest buying a variety of index funds. She could include one that invests in REITs, real estate investment trusts.