Avoid locking into anything fixed like it was the plague. In a future rising interest rate environment, it's just not smart. So that Xs out bonds, CDs, (most)treasuries.
First of all, rate hunt on high yield reward checking accounts the best right now are offering 5.25% and they are a family of three banks in Wichita, Kansas(accessible online)--Advantage, Redneck(no lie), and AmericaNet Banks. If you do a good job hunting you should be able to keep up with the rising interest rates pretty well. Second, I would buy a significant amount of TIPS with the intention of selling 5-7 years down the road. In this case you bank on coupon rate + inflation protection + capital gain from selling a higher yielding coupon rate at a time when the coupon rate will be low--due to their tax properties I would buy them in a tax sheltered vehicle, assuming the individual was old enough to access them penalty free at the time. I would then put a large portion of money in stocks weighted heavily towards commodities(or a company that is very early in the supply chain), that would suffice for all of the money, but if you had some balls and knew enough to do your due diligence, I'd take a portion of the money and move it to emerging markets. And I would bet on countries like Kuwait, China, Brazil, and the gulf states(like Abu Dhabi). The bet would be that the gulf states will step up their transition towards their own currency and drop the dollar as its only reserve. In that case you bank on the market increase as well as the appreciation against the dollar.
Edit approximate numbers: Approximately equal portions in each if you don't do emerging. If you do, I'd still put a 1/3 in high yield and then 22% in the remaining 3.
P.S. I don't give out my 2 best ideas.
