balanced mutual

What Is A Balanced Mutual Fund

Have you ever wondered what is a balanced mutual fund? Basically a mutual fund that is balanced is one that is a combination of bonds, stocks and cash holdings. The goal of this type of fund is to conserve capital, appreciate capital as well as create an income stream.

The actual term balanced isn’t used too much these days the term that is more common today for this type of fund is asset allocation.

A good mutual fund will enable you to be more diversified with your money. Not only can you hold stocks and bonds but you can do so across different countries and different sectors of these holdings. You can actually put your own mutual fund together if you want to go down that path, but it is much easier to have someone that is experienced in this area to put one together for you.

Your mutual fund portfolio should include a number of different funds with multiple investment objectives. There are funds that will do this automatically so there is no need to arrange a fund manager to do it for you. There are quite a few different combinations available and if you have no experience in this area it can be quite overwhelming, not to mention confusing.

If you have an idea of what kind of mutual fund you want then you can call and have a prospectus sent out to you. There is some investment terminology that can be difficult to understand so if you have trouble you may want to find someone that can explain it all to you. It is important to know everything about the fund before you invest as this is your money and your future at stake.

Once you have a look through the prospectus and get an understanding of it then you can make a decision about how you want to proceed. One factor that you will want to consider is the percentage of the combined funds. Usually a 50/50 percentage is good.

When you have made the decision as to what fund to proceed with then you just hand over your investment money and the mutual fund manager will handle everything for you. They will deal with the purchasing of bonds and stocks and other holdings and all you need to do is sit back and watch your funds grow.

When looking for balanced mutual funds, keep in mind that this term isn’t really used very much these days, so you will want to look for asset allocation. Some funds will also use a year number and these funds will usually have more bonds than stocks and basically the closer that the year is to the year on the fund then the better the fund will perform. You really do need to do your research before jumping into anything related with investments so you have some idea of what is involved and what the different terms mean.

Balanced mutual funds do not mean that you have a completely safe investment as these funds are just as volatile as any stock investment. There is always some risk involved with stock investing and that is one reason why it is good to balance your funds so you don’t have all your eggs in one basket. By investing in several different types of funds you can reduce your overall risk.

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Sector Mutual Funds and ETFs

Sector mutual funds are funds that allow you to invest in companies within a single sector. There are all kinds of sector funds available so all you have to do is pick one or more that piques your interest. Sector funds are an important addition to your portfolio to stay more diversified.

You can pick from hundreds of tech stocks or energy stocks as your sector. There are also subsectors within those sectors. Now do not let all this confuse you, a good broker who is worth their salt can keep things straight for you and explain any aspect that is confusing.

You haver been told that to be diversified in your portfolio is important but have you been told that if you invest in sector mutual funds and regular mutual funds there may be some overlap that could possibly increase your risk for loss. A good idea to minimize this chance is to combine an energy fund with a subsector fund like wind turbine energy.

Sector funds are also a good way to close any gaps you may have in your portfolio so you have all the bases covered. They can be used to capture growth in the area of choice. Just like when the stock market bottomed out a few years ago and the car companies stocks were very low. If you had a sector fund with car company stocks as the sector then you could have made a killing when the prices of the stocks started to rise.

Because they are so specific, sector funds are considered riskier and more volatile then regular mutual funds. You may want to limit the amount of sector funds just because of this. Every sector behaves differently at any time due to the ever changing economic indicators. Some sectors have been known to have higher highs and lower lows than some broad spectrum mutual funds and subsectors can be even more volatile. Sector funds have such a high turnover rate that you need to be tax conscious. The high turnover rate is an indicator that the fund buys and sells assets within the fund.

You need to keep in mind any and all tax implications of your very volatile sector funds. If you make some money and take it in payment then you will be taxed at the current capital gains tax rate which is about 15%. If you should lose money then of course you can deduct the loss as well.

You can also minimize your risk by considering sector spider funds or exchange traded funds like Gold ETFs – investing in a physical-backed security, with the liquidity an exchange market offers. Both of these funds trade just like stock on the open stock market but offer the diversification of a sector fund. Spiders and ETFs have lower expense ratios and also have more investment options like short sales.

Always consult your financial advisor and get their advice on sector mutual funds. The two of you can go over your portfolio to see where there is lack and what type of sector fund is needed to fill any gaps in diversification and help with a suitable investment strategy to minimize your risk.

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Balanced Mutual Fund

What is the definition of a balanced mutual fund? A mutual fund that is considered balanced traditionally are a combination of stocks, bonds, and cash holdings. The goal being not only creating an income stream but capital conservation and capital appreciation.

Not too many people use the termed balanced any more though, it is a bit old school. The current terminology is asset allocation.

A good mutual fund will allow you to easily diversify your money by holding the stocks and bonds already mentioned but also across different sectors of these holdings and even in many different countries. I would imagine if you want to you could try to put your own mutual fund together but I am equally sure that there are some out there that have what you want already put together so give yourself a break and take the shortcut.

A balanced mutual fund portfolio should encompass a few different funds with multiple investment objectives addressed. Some mutual funds do this automatically so you will not need to direct the fund manager to do this for you. There are so many different combinations available that to try to understand them all will literally make your head spin.

Do your research and find a couple that you are interested in and call to have them send you their prospectus. If you do not understand the terminology then find someone to explain it to you. You cannot go off half-cocked when it comes to planning your future. If you do not know something then ask.

Once you have understood the prospectus then you can make a better informed decision regarding how you want to proceed. Some things to consider in your decision-making process is the percentages the mutual fund uses. 50/50 is a good percentage.

All you have to do once you have made your decision is to plunk down the money. The mutual fund manager handles the rest for you. By handling the purchase of the stocks and bonds and other holdings the ratios stay intact and you can just sit back and watch it grow.

Like I said the term balanced isn’t always used anymore so keep your eyes open and realize that the terms asset allocation, blend or even a year number are often used these days. A fund using a year number will usually have more bonds than stocks and the closer the year gets to the year on the fund then the better it will perform. Do not take what I say as Gospel either, Do your research then make your decision.

Keep in mind that even though you have a balanced mutual fund that it can’t suffer losses or that it will be less volatile than other stocks. This is just not true, you can suffer the same fate as other more risky stock ventures. One way to combat this is to invest in several different types of mutual funds, some risky and some more conservative to reduce your risk.

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