Index funds are an easy, low-cost way to get diversified. Are they right for your portfolio?
What is a balanced fund?
A balanced fund is a type of mutual fund that contains both stocks and bonds. It is sometimes called a blended fund. Typically, stocks make up between 50 percent and 70 percent of a balanced mutual fund, with bonds accounting for the remainder. However, every fund manager allocates the two in different ways, and there’s no set definition of how much of each a balanced fund should or must contain.
A balanced fund provides diversification, because an investor’s money isn’t all tied up in a single type of investment. Many investors who choose a balanced fund do so because they want something that’s less vulnerable to the ups and downs of the economy. They also may want something that gives them the best return on their money, even if that means they earn less in a strong economy than they would if they invested in something less secure.
A balanced fund is designed for the long haul rather than for getting rich quick. This makes the income derived from it more modest than many other types of investments, but it also reduces the risk involved.
One selling point of balanced funds is that investors can achieve diversification without having to evaluate several types of stocks and other investments to determine which are the best choices, and they also don’t have to take the time to invest individually in several different types.
Here’s how to choose mutual funds like a pro.
Balanced fund example
Balanced funds are typically conservative in their makeup. For example, a fairly safe balanced mutual fund might contain 60 percent stocks and 40 percent bonds.
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