A Balanced Fund Provides the Best of All Possible Worlds

Investing in a balanced fund could be exactly what you need to do as an investor. While some mutual funds strive to provide growth and others provide income, the balanced fund does its best to provide both. This makes it a very sensible choice for many investors regardless of their situations. Here are the basics of the balanced fund and why you might want to consider investing in one.

The Balanced Fund

The balanced fund is a mutual fund that invests in a number of different types of securities. Most mutual funds are equity funds, which means that they invest in only stocks. Another popular type of fund is the bond fund. However, with a balanced fund, you will get a mutual fund that invests in stocks, bonds and possibly even the money market. Therefore, this provides you with a slightly different form of investment than your typical mutual fund.


One of the major benefits of investing in a balanced fund is that it provides you with superior diversification. Every mutual fund strives to provide some level of diversification. Even equity funds will diversify their holdings over a number of different stocks and industries. However, a balanced fund not only diversifies their stock holdings, but they also diversify the entire portfolio over several different markets. This can substantially lower your risk and protect your capital. If the stock market plummets, the holdings in bonds or the money market can still keep your fund out of the negative. Therefore, this type of investment makes a lot of sense when slow and steady growth is the objective.

Capital Appreciation

The stock component of this type of investment provides you with some type of capital appreciation. Since you are not investing fully in stocks, as you would with an equity fund, the capital appreciation will be limited. However, you will be able to net some type of growth in the long run.

Income Producing

The balanced fund also does a good job of providing a regular income to its investors. By investing in bonds, the fund receives regular interest payments. Therefore, they turn around and distribute those interest payments in the form of dividends to the investors. Many people invest in bond funds so that they can receive some kind of regular income. However, this limits their potential for capital growth because bonds do not change very much in value, if it all.

Investment Considerations

With all of the benefits that you receive from investing in a balanced fund, it is easy to see why it is such a popular choice among investors. When you are trying to choose investments for your portfolio, you should strongly consider putting some money into a balanced fund. This type of investment should most likely not make up the majority of your portfolio. However, when you combine it with other forms of investment, such as a stock portfolio, it can really help you out in the long run.

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