Balanced mutual funds are hybrid funds that offer a relatively fixed mix of stocks and bonds that have either high or moderate equity component or even higher fixed-income component. These balance funds comprise of various combinations of stock components and bond components in a single portfolio, offer the investor a diversification in their investments.
Balanced mutual funds are best suited for investors who are looking at investing for long-term along with benefits such as safety, capital appreciation and income. Also, the investor doesn’t have to invest in the balanced mutual funds with huge amounts. These funds allow the investors to invest in each asset class within the bracket of maximum and minimum net asset values.
Unlike most mutual funds that adhere to life-cycle, target-date, and active management of asset-allocation funds, balance mutual funds do not change the asset mix owing to these factors. The asset mix only changes if the fluctuations in the market trends tend to go in the direction of causing loss to the investors.
Simply put, these funds offer you a balance of stock components and bond components which make it the investment less risky and offer more profit-earning options to the investors. These funds work brilliantly during market fluctuations such as inflation and recessions.
Generally, when investors look at investing the in mutual funds or any other investment options, they have more than one objective for the investment. The balance mutual funds offer low risk because of their “asset allocation” function. Hence, investors who do not want to take high risks opt for these funds so as to not let their financial corpse be affected by inflation and to receive an income that supplements current needs.
The funds also cater to the income needs of the investors. It creates an income stream and makes the portfolio less volatile. Many investment-grade bonds offer semi-annual income while the large-company stock gives out quarterly pay-outs to accelerate the flow of finances for an individual.
These bonds work brilliantly for a retiree as they may take distributions in cash to bolster income from pensions, government subsidies and personal savings. Also, these bonds are advised for the first-time investors too as they don’t need excessive management, offer low risk, and offer good exposure to mid-cap and small-cap stocks. Overall, the balanced mutual funds are an excellent and safest way to create a financial corpse.