What Is a Balanced Fund?

A balanced fund is a mutual fund that typically contains a component of stocks and bonds. A mutual fund is a basket of securities in which investors can purchase. Typically, balanced funds stick to a fixed asset allocation of stocks and bonds, such as 70% stocks and 30% bonds. Bonds are debt instruments that usually pay a stable, fixed rate of return.

The investment objective for a balanced mutual fund tends to be a mixture of growth and income, which leads to the balanced nature of the fund. Balanced mutual funds are geared toward investors who are looking for a mixture of safety, income, and modest capital appreciation.

Key Takeaways

• Balanced funds are mutual funds that invest money across asset classes, including a mix of low- to medium-risk stocks and bonds.
• Balanced funds invest with the goal of both income and capital appreciation.
• Balanced funds can benefit investors with a low risk tolerance, such as retirees, by offering capital appreciation and income.

Advantages of Balanced Funds

The investment objective for a balanced mutual fund tends to be Because balanced funds rarely have to change their mix of stocks and bonds, they tend to have lower total expense ratios (ERs), which represent the cost of the fund. Moreover, because they automatically spread an investor's money across a variety of types of stocks, market risk is minimized if certain stocks or sectors underperform. Finally, balanced funds allow investors to withdraw money periodically without upsetting the asset allocation.

Pros of Balanced Funds

• Diversified, constantly rebalanced portfolio.
• Low expense ratios.
• Less volatility.
• Low-risk