What Are Balanced Mutual Funds?
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What Are Balanced Mutual Funds?
If you are looking for a single investment that combines the attributes of both growth and income while preserving capital, then you might be interested in a balanced mutual fund as part of your asset allocation strategy.
Things To Know
- A balanced fund combines growth and income.
- Balanced funds invest in a combination of securities.
A balanced fund is generally a "middle of the road" type of mutual fund. Balanced funds invest in a combination of stocks, bonds, and money market instruments (cash). Some balanced funds also include other investment types such as real estate or precious metals.
The goals of a balanced fund
Balanced funds are managed to attain three main goals:
- To conserve principal and capital
- To maintain current income
- To promote long-term growth
Why choose a balanced fund?
Because bond and stock prices often move in opposite directions, balanced funds holding both securities have lower overall risk. Balanced funds do not usually offer as high a return as pure stock (equity) funds, but they also don’t drop in value as much when stocks are in decline. Because of their long-term growth and intermediate-term safety, balanced funds are good long-term choices for investment goals like college or retirement planning for investors with moderate risk tolerance.
