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|Should I buy a balanced mutual fund?
By The-Adviser.com -
|New York -
A balanced mutual fund generally consists of a
mix of 60% stocks and 40% bonds. This is a traditional asset allocation model for
investors who want exposure to equities but want the security of fixed income securities.
Although these mutual funds do allow investors to reach a certain asset mix,
there are other investment methods for obtaining similar asset allocations.
There are some drawbacks to investing in balanced mutual funds. The bond holdings in a balanced fund may be of varying lengths; hence, they can never match the individual needs of each investor. For instance, a balanced fund may hold bonds for 3 years while you need a bond for 10. In that case, you would significantly earn less on your bond investments. For a do-it-yourself investor not familiar or comfortable with making investment mix decisions, a balance fund may be suitable.
Investors should consider building their own portfolio mix by owning stocks, or stock index funds with either bond funds or individual bonds that you hold to maturity. An independent Fee-Only Financial Adviser can help you do that.
A Fee-Only independent Financial Advisers can determine if a Balance Fund is appropriate.
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