The best balanced mutual funds for simple investment diversification.
Choosing a balanced mutual fund with stocks and bonds might temper any large swings in a portfolio’s value. So if the stock market declines, you’ll have fixed assets to prop up your returns. The benefits of investing in a balanced fund are simplicity and diversification. Balanced funds normally rebalance back to a target stock/bond mix, saving investors time and the stress of portfolio management. A balanced mutual fund can streamline investment decisions. Most of these balanced funds come with reasonable expense ratios, while some are sensitive to the tax consequences caused by excessive turnover. There is a mix of passive index fund choices along with several actively managed picks. Here are seven of the best balanced funds to invest in now.
BMO Conservative Allocation Fund (ticker: BDVSX)
This BMO fund, which has been around since 2014, is suitable for a more conservative investor concerned about the volatility from equity exposure. Since it has lower equity exposure and essentially is a fund composed of other funds; it offers diversification and downside protection. The breakdown of holdings as of the end of February includes some exposure to domestic and international equity funds, with about a 70% allocation in bond funds. “BDVSX is run by the old-line London company BMO, which has been around for over two centuries. And they manage this fund much more conservatively than the funds of most other mutual fund companies,” says Steven Jon Kaplan, investment counselor and CEO at True Contrarian Investments. “(The majority) of their assets are in fixed income, primarily government bonds of many countries and the safest corporate bonds rather than riskier high-yield debt,” he adds.
Trailing one-year return: 8.3%
Expense ratio: 0.39%
Vanguard Balanced Index Fund (VBIAX)
VBIAX has a moderate allocation, with about 60% invested in stocks and 40% in bonds, so this fund roughly follows the traditional route in the 60/40 portfolio allocation. The fund tracks two indexes representing the overall U.S. stock and U.S. taxable bond markets. “Exposure to both stocks and bonds with a low expense ratio and great historic returns make this fund desirable as a core holding for many portfolios,” says Tevan Asaturi, founder and CEO of Asaturi, a financial consulting firm in Los Angeles. The fund offers investors a balance of growth and income while being diversified. “The fund holds many noteworthy companies such as Apple (AAPL), Alphabet (GOOG, GOOGL), Facebook (FB) and JPMorgan Chase & Co. (JPM), while minimizing risk not only by diversifying between stocks and bonds but also by diversifying the stocks and bonds within the portfolio,” Asaturi says.
Trailing one-year return: 21.5%
Expense ratio: 0.07%
JPMorgan Investor Growth Fund (ONGAX)
“A more aggressive investor is well served by the JPMorgan Investor Growth,” says Robert Johnson, finance professor at Heider College of Business at Creighton University. With even just $500 to invest, you could buy into the JPMorgan Investor Growth Fund. The fund has 24 holdings and, for portfolio stats, its net assets are more than $3.5 billion. The fund invests in a diversified group of mutual funds, with the JPMorgan U.S. Equity Fund (JUEMX), JPMorgan Large Cap Growth Fund (JLGMX) and JPMorgan Large Cap Value Fund (JLVMX) as its top three holdings. Its top sector allocation is technology — a sector that has experienced much growth — weighted at more than 19%. Speaking on ONGAX, Johnson says the fund has consistently outperformed its peers for the last 15 years.
Trailingone-year return: 32.7%
Expense ratio: 0.97%
Fidelity Freedom 2045 Fund (FFFGX)
A best balanced fund list would be incomplete without a nod to a target-date fund. The target-date fund’s goal is to achieve capital growth until the target retirement date and capital preservation thereafter. For a 41-year-old seeking to retire at age 65 in 2045, this fund starts aggressively and adjusts the asset allocation to become more conservative over time. This is the ultimate one-stop-shop investment. FFFGX is part of the Fidelity Freedom family with several balanced target-date funds. The fund is composed of about 51% domestic equity funds, 41% international equity funds, 6% bond funds and the remaining allocation in other assets. FFFGX owns shares in more than 30 Fidelity funds from diverse corners of the financial markets, which explains the 0.75% expense ratio.
Trailing one-year return: 33%
Expense ratio: 0.75%
CIBC Atlas Income Opportunities Fund (AWIIX)
AWIIX holds a mix of common stock, preferred stock, convertible securities and fixed-income securities like corporate and government bonds. The fund’s one-year average total return is about 18% as of the end February, and AWIIX is suited for an investor interested in income-producing investments and capital appreciation. The fund holds investments that produce reliable cash flow at fair valuations with a promise of strong return on capital. The goal of the fund is to buy and hold securities for the long-term, but its portfolio managers will sell securities that may become overvalued if the business declines or if there are other more attractive market opportunities.
Trailing one-year return: 18.1%
Expense ratio: 0.74%
Calamos Growth and Income Fund (CVTRX)
Equity exposure for this fund is greater than other funds on this list, ranging from 70% to 85% equity funds. This type of allocation may be more cut out for a younger investor who has more time in the market or an aggressive investor who can weather volatility and can handle greater risk. CVTRX has a higher expense ratio of 1.1%, but the fund boasts more than a 10% annualized return since its inception. CVTRX has more than 200 holdings in total, with a hefty weighting in the information technology sector of about 25%. Apple, Microsoft Corp. (MSFT) and Amazon.com (AMZN) are among its top three holdings.
Trailing one-year return: 34.5%
Expense ratio: 1.08%
T. Rowe Price Capital Appreciation Fund (PRWCX)
PRWCX is a capital appreciation fund that fits the investing strategy for moderate and aggressive retail investors. As of Feb. 26, 2021, the fund’s assets totaled about $45 billion, with more than 100 holdings. “T. Rowe Price is best known for their growth strategies as well as international investments, and this is reflected in the Capital Appreciation Fund,” says Kostya Etus, director of research at Orion Advisor Solutions in Omaha, Nebraska. Most people can look at a balanced fund in terms of an equity exposure between 50% and 70%, along with fixed-income exposure, says Virag Shah, portfolio strategist at Van Leeuwen & Company in Princeton, New Jersey. PRWCX’s composition exhibits the industry standard of the balanced fund. “What T. Rowe has been very successful with is opportunistically reallocating between stocks and bonds/cash based on market conditions,” Etus says. This he adds has led to the fund consistently being one of the strongest performers in its peer category.
Trailing one-year return: 22.1%
Expense ratio: 0.7%
The best balanced mutual funds:
— BMO Conservative Allocation Fund (BDVSX)
— Vanguard Balanced Index Fund (VBIAX)
— JPMorgan Investor Growth Fund (ONGAX)
— Fidelity Freedom 2045 Fund (FFFGX)
— CIBC Atlas Income Opportunities Fund (AWIIX)
— Calamos Growth and Income Fund (CVTRX)
— T. Rowe Price Capital Appreciation Fund (PRWCX)
