If the $10k is really an emergency fund, keep it in cash. 1.2% isn't bad. Maybe look towards putting part of it in a CD for longer term if you can get more than 1.2%.
Don't invest your emergency fund in stock based mutual funds!!! Every few years, stocks drop by 10% or more, and you'll loose a mustache-load of cashola quickly. You never know when it will happen. Could start tomorrow.
If $10k is all you need for emergency fund, then start collecting cash for a mutual fund investment.
You can get in at Vanguard for as little as $1000 on some funds. A decent fund, if you only have $1k and don't want to learn about investing, is the Vanguard Target Retirement 2060 fund. They do the asset allocation for you (the small/mid/large/growth/balanced thing you mentioned).
If you have more money, you can buy a couple mutual funds. Total Stock Market Index plus Total International Index might be a good pair if you want 2 funds. $3000 minimum to get either of those, and $10000 if you want lower expense ratios for the Admiral class shares.
Stock based mutual funds are awesome if you definitely don't need the money for 5-10 years. Otherwise, you might lose money over shorter periods.