Definition:
A balanced fund automatically spreads your money across a diversified portfolio of stocks and bonds. Most of the time a balanced fund will specify an allocation such as 60% stocks/40% bonds and stick closely to that allocation.
Pros Of A Balanced Fund
- Rather than having to select a stock fund (or several stock funds) and a bond fund (or several bond funds) you can own one fund which automatically chooses the underlying stock and bond investments for you.
- Balanced funds are great when you have smaller amounts to invest, or when you don’t understand investing well and aren’t ready to hire a financial advisor.
Cons Of A Balanced Fund
- Sometimes the fees in a balanced fund will be a bit higher than if you choose your own individual funds because they are doing the work of selecting the underlying funds for you.
- Within the balanced fund you cannot choose how much is in what type of stocks, such as international, small cap, large cap; or what type of bonds, such as government, corporate or high yields. Of course, the whole point of the balanced fund is that someone else is making those choices for you.
