Some people equate investing with gambling. They want to make big bets, hoping to win big. But sometimes things go the other way. After a loss, some gamblers double their wagers -- and then double them again if necessary to regain their starting position.

But sensible investing doesn't require that level of bravado. A rational approach will almost always yield much better results.

Casey in Braintree, Mass., has discovered this notion, as I learned in an e-mail exchange with him last week. Casey's question was how to invest for a relatively high probability that he could receive a return of 8.8 percent for the next 12 years. I was curious about how he came up with such a specific objective, and we exchanged a few messages.

Casey's story is a good lesson for many investors reeling from more than two years of dreadful returns in growth stocks. At 50, he was dismayed that he has lost a great deal of money in technology stocks. He had been thinking he needed an even more aggressive strategy in order to regain the ground he had lost so he could retire at age 62.

Fortunately, his wife intervened. After doing some reading on retirement planning, she told him to write down the answers to some questions before he made any investment decisions. Among those questions:

1.) How much income will I need in retirement, and how much of that must come from my own savings?

2.) How big must my nest egg be at age 62 to give me that much income?

3.) How much retirement savings do I have now and how much am I regularly adding?

4.) How big is the gap between what I have now and what I must have at age 62?

5.) If I continue saving at my present pace, what growth rate do I need on my investments in order to fill that gap over the next dozen years?

After some soul-searching and combing his financial records, Casey used a financial calculator to answer the last question. He was surprised to learn he could achieve his goal with an annualized return of 8.8 percent -- he had been thinking he would need much more, perhaps 15 percent or even more.

Granted, a return of 8.8 percent sounds mighty good these days, with the stock market falling without an end in sight. Relatively few mutual funds have gained 8.8 percent in the past 12 months.

However, that's not an unrealistic return to expect over a 12-year period. History suggests that 8.8 percent is often feasible, even with the minimal diversification of a Standard & Poor's 500 Index fund.

Available data, going back to 1926, show results for 65 12-year periods for the S&P 500 Index (SPX: news, chart, profile). The average annualized return of all those periods was 11.2 percent, and two-thirds of the periods had returns more than 8.8 percent. (Of course that also means there was a one-in-three chance that over a period of 12 years the index would fail to deliver 8.8 percent.) The most recent 12-year period with an annualized return less than 8.8 percent started in 1973.

This brings me back to Casey's question: What's a low-risk way to get an 8.8 percent return between now and 2014? Our only reliable guide, once again, is history. Over the past 32 years, from 1970 through 2001, a portfolio invested 80 percent in bonds and 20 percent in globally diversified stock funds would have grown at an annualized rate of 10 percent. The worst 12-month period in that time was a loss of 1.9 percent. Considering that this period included 1973, 1974, 2000 and 2001, that is an amazingly small amount of risk.

But that return is too high to expect in the future, as 80 percent of it was built on a long period of declining interest rates, which boosted bond prices. To achieve the growth he needs, Casey should have more than 20 percent of his portfolio in stock funds.

From 1970 through 2001, a portfolio split 50/50 between short-term bonds and globally diversified equities would have appreciated at 12.2 percent, annualized, with a worst-12-year loss of 15.8 percent.

Assuming Casey is prepared to weather a loss of that size, then the 50/50 portfolio is my suggestion for seeking the 8.8 percent return he needs over the next 12 years. A low-cost short-term bond fund can make up the fixed-income part of that portfolio.

Ideally, the global equity part of Casey's portfolio should be allocated in mutual funds representing nine major asset classes, as follows: 12.5 percent each into U.S. large-cap, U.S. large-cap value, U.S. small-cap and U.S. small-cap value; and 10 percent each in international large-cap, international large-cap value, international small-cap, international small-cap value and emerging markets.

Casey can approximate that combination with seven Vanguard index funds that we listed in last week's column:

Vanguard 500 Index VFINX 12.5%

Vanguard Value Index VIVAX 12.5%

Vanguard Small Cap Index NAESX 12.5%

Vanguard Small Cap Value Index VISVX 12.5%

Vanguard Developed Markets Index VDMIX 20%

Vanguard International Value VTRIX 20%

Vanguard Emerging Markets Index VEIEX 10%

Casey can get where he's going without having to try to "hit a home run" in particularly aggressive investments. In this 50/50 portfolio, he'll own plenty of aggressive stocks, including technology companies, small-cap companies and value companies.

If he had had this portfolio, Casey would probably be feeling much better about his investments these days. From the start of 2000 through the first six months of 2002, he'd have a total return of about 1.1 percent. That's not spectacular, but comparatively speaking it's not bad at all!