AN INTRODUCTION TO BALANCED MUTUAL FUNDS
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A balanced fund is generally a "middle of the road" type of
mutual fund. Balanced funds invest in a combination of stocks, bonds, and money
market instruments (cash). Some balanced funds also include other investment
types such as real estate or precious metals.
Balanced funds are managed to attain three main goals:
conserve principal and capital
? To maintain current income
? To promote long-term growth
Because bond and stock prices often move in opposite directions,
balanced funds holding both securities have lower overall risk. Balanced funds
do not usually offer as high a return as pure stock (equity) funds, but they
also don't drop in value as much when stocks are in decline. Because of their
long-term growth and intermediate-term safety, balanced funds are good long-term
choices for investment goals like college or retirement planning for investors
with moderate risk tolerance.
Now let's examine what kinds of investments are included
in a balanced fund.