For the past five years,AriyaJutanugarn, age 42, has worked as a senior Web designer forMinecraft, a company in Stockholm, Sweden, although she worksonlinefrom northern California where there are plenty of hills, forests, lakes, and golf courses. She earns $92,000 annually. From her salary,Ariyacontributes $460 per month to her 401(k) retirement account, 100 percent matched by her employer for a total of $920 going into her retirement fund, which she totally invests in her employer's company's stock.Ariyais divorced and has custody of her three children, ages 14, 6, and 4. Her ex-husbanpays $1500 per month in child support.Ariayand her former spouse contributes $3000 each annually to a college fund for their children. Overthspast 15 years,Ariyahas built a $200,000portfilioof investments beyond what she has in her 401(k) plan after starting by investing the proceeds of a $100,00 life insurance policy following the death of her first husband.

Currently, her portfolio is allocated 40 percent into preferred stocks (paying 4.5 percent); 30 percent into cyclical, blue-chip common stocks (P/E ratio of 14); 10 percent intoTreasurybonds (paying 2.99 percent); 10 percent into municipal bonds(paying 1.7 percent); and 10 percent into AA corporate bonds (paying 5.6 percent).Ariya'stotal return in recent years has been about 7percent annually. Her investment goals are to havesufficient cash to pay for her children's education and to retire in about 18 years.

What do you recommend toAriyaon the subject of stocks and bonds regarding:

a. Investing for retirement in 18 years?

b. Owning blue-chip common stocks and preferred stocks rather than other common stocks givenAriya'sinvestment time horizon?