Image: Investment building blocks © Comstock Images, Jupiterimages

The core-holding concept has to be one of the most exciting investing ideas since Christopher Columbus started cold-calling potential backers.

OK, that's sarcasm. "Core holding" and "exciting" don't go together. But what core holdings lack in thrills, they make up for in importance.

A core holding is just what it sounds like: It's the central part of your portfolio. The core requires investments that will be reliable year in and year out. They're the solid foundation for the rest of a portfolio.

To reach your investment goals, your portfolio needs a solid, reliable core.

What makes a core mutual fund?

Large-cap blend funds, which own big companies with middle-of-the-road stock prices, are core stalwarts. Large-blend funds usually don't lead performance lists, but they're even less likely to bring up the rear. They're boring, which makes them ideal core choices.

For cautious investors, large-value funds used to be the preferred core holdings. These funds invest in big, well-established companies with stocks that are cheap relative to those of other large caps. Historically, that focus on slow-growing, generally steady companies earned large-value funds the lowest risk scores of any of the Morningstar style categories.

But those risk numbers are deceiving. In down markets, value-oriented funds often lose more money than their blend counterparts. Large-blend funds may be more reliable.

But wait. If large-cap funds are good core holdings, why not large-growth funds?

Large-growth funds don't have the best temperament for core holdings; they tend to have bigger mood swings than their blend or value counterparts. Their highs are nice -- they mean higher returns -- but when they're down in the dumps, that spells bigger losses than you might want at the heart of your portfolio.

If the allure of large-growth funds is just too powerful, go ahead and invest in one. But invest in an equal amount of money in a large-value fund, too. Owning both is about the same as investing in a large-blend fund.

You might want to include a foreign-equity fund as a core holding, too. That way, you aren't staking everything on the U.S. market. The fund should focus on the world's developed markets, investing in leading companies, just as your core U.S. funds do.

Click here to become a fan of MSN Money on Facebook

Finally, a bond fund might make a good core holding if your asset allocation calls for it. Stick with bond funds that invest in high-quality securities. Focus on those that favor the intermediate part of the yield curve. Why? Because the longer a fund's maturity, the more volatile its returns generally are. You can capture much of the return of a long-maturity fund with an intermediate-maturity fund, but with a lot less volatility.