The current approach of investment used by cliff has some form of insecurity for both forms of investment. Investment in stocks does not guarantee any return to him as the investor thus there is a greater possibility of him losing his money. This would be good for investors who prefer the benefit of partial ownership in accompany and unlimited potential of rising stock price which is not his case. Another limitation is that stock prices tend to be volatile rising and declining very quickly and such declines which cause panic to investors forcing them to sell at losses (Financial web).

Bonds also have their own limitations these are: Bonds offer no protection against inflation because inflation causes interest rates to rise and consequently bond prices fall, bond prices change often because market rates vary after the issuing of the bond .Additionally, taxes will be owed on capital gains or losses unless the bonds are exempted from tax and diversification is also difficulty to achieve (Quinn & Jane Bryant, 1997).

The investment portfolio for Cliff should look like this.

Cliff should invest $60,000 in the first two mutual funds (Fidelity Growth Discovery and Fidelity OTC) for the weddings because they have high returns –but high risk- that will enable him get enough funds for the wedding by the end of the three years. The reasons for choosing to invest in two funds is to enable him diversify his funds because of the high risk of these types of funds. (Investment Products)

Cliff should then invest the remaining $30,000 in the remaining low return rate; low risk funds like the vanguard life strategy income fund and vanguard fixed annuity-single 5 to ensure that he has atleast some amount that is quite secure. (Mutual Funds) In addition to being low risk the tax free bond funds will offer him the advantage of not being taxed because it’s used for government investments. (Fund Facts) Choosing different types of funds will be important for diversification.

After every three years Cliff should rebalance his portfolio. First he should move the $60,000 investment from the high risk type of mutual funds to low risk funds because he will have reached his goal of raising enough funds for the shortest time possible however at high risk. Then for the other investments in the low return type of funds Cliff should always move the profit (leaving the core amount) after every three years to a higher return rate, high risk type of funds to maximize profit while securing the core amounts.