The Blend Fund: Mixing the Best of Everything

The blend fund is a type of mutual fund that provides a nice mix of investment options. Although it is often compared to the balanced fund, it is a completely different type of investment. Here are the basics of the blend fund and whether or not you should think about putting money into one.

The Blend Fund

The blend fund is an investment that seeks to provide capital growth for its shareholders. However, this type of fund seeks to provide that by using more than one investment strategy. They will invest in both value stocks and growth stocks in order to achieve capital gains for the investors.

Many people often associate this with a balanced fund. However, the main difference between these two types of funds is that the balanced fund invests in securities besides stocks. A balanced fund will invest in bonds and the money market as well as stocks. A blend fund only invest in stocks. Therefore, it attempts to diversify itself within the stock market and is very susceptible to the fortunes of the stock market overall.

Value Stocks

One of the main parts of the blend fund is investing in value stocks. With this type of investment method, mutual fund managers have to do a great deal of research in order to locate value companies. These are stocks that the fund managers believe are undervalued. Therefore, they purchase shares in these companies and hope that the price in the market bounces back up to where they believe the value is.

Growth Stocks

In addition to investing in value stocks, growth stocks or the other main portion of the blend fund. A growth stock is a stock that has shown a clear potential for rapid growth in the near future. Mutual fund managers also have to do their fair share of research in order to locate successful growth stocks as well. They will look at financial statements of these companies and try to identify a trend. For example, if a company posts larger than expected returns in consecutive quarters, this can be a signal that big things are on the way. The fund managers will look for companies and industries that are poised to explode in the near future.

Volatility

This type of fund can provide you with a nice return if you choose the proper mutual fund for the job. However, you should know that there is some volatility involved here. Since you are investing in growth stocks, there is always the possibility that the fund could make the wrong investments. If the companies do not grow as expected, the returns could suffer.

 

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