Balanced Mutual Fund
Mutual Funds are the best investment option today and a person gets to choose the scheme which is most suitable for him. A Balanced Mutual Fund will have the advantages of low risks, regular income and quite a bit of capital appreciation. To get the right mix of all these advantages the Balanced Mutual Fund invests in various stocks, bonds and also money markets. The allocation between high risk investments like stock and low risk bonds is 60:40. In many schemes the investor has the choice of switching these ratios according to the performance of the market.
You will find quite a few balanced mutual funds appearing on the 10 Top Mutual Funds list. Most of them do very well and many people prefer this type of scheme. The 60% of assets which is invested in stocks is also diversified into various sectors that are known for their higher returns. The allocation is directly related to the earning potential of the stock amongst all sectors. Allocation of funds in bonds is for providing definite returns at almost a fixed rate over a certain period. The stability of balance mutual funds is derived from this investment in bonds which are generally issued by banks, governments and even municipalities.
Balanced Mutual Funds as the name suggests has a balanced approach towards investments and returns. The purpose is to generate a good return and at the same time appreciate the capital as well. The power to switch the ratio of investment between stocks and bonds gives it an edge over other mutual funds. The investor has the chance of getting the highest returns in a bullish market and can protect his funds when the market is down. This can also have a negative effect if the investor is not quick enough to change the ratios with the changing markets.
Another point to consider in Balanced Mutual Funds is the period of bonds. If you have the need of long term growth potential then long term bonds will be the most suitable as they give higher returns compared to bonds which have short tenures. An ideal Balanced Mutual Fund will perform quite well even when the markets are down. It will all depend on the fund manager on how efficiently he is able to manage the fund assets, so that there is growth as well as income at regular intervals.
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