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  Tuesday November 21, 2017

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PERFORMANCE OF BALANCED FUNDS
Learn even more about this topic with the Encyclopedia of Personal Finance™

There are several ways to measure the performance of a balanced mutual fund. The first things to look at are a fund's total return and its volatility (tendency to fluctuate in value) as compared to other balanced funds. A fund's total return is its income combined with the increase or decrease in its net asset value (NAV). Typically, a balanced fund's return will be more stable over a five- or ten-year period than will that of a pure growth fund. It should also show less volatility than a pure stock fund and higher returns than most bond funds.

A fund's current asset holdings help explain the past performance of a balanced fund. You should ask questions such as the following: Did the fund invest exclusively in Treasury bonds, or were corporate bonds included? How much cash did the fund have on hand?

Two other factors affecting performance are expenses and management fees, both of which can be a drag on overall fund performance if they are excessive.

Also consider a fund's turnover, which reveals how often it sells existing assets to purchase other assets.

The higher the turnover, the more transaction costs might lower your fund's total return. Excessive turnover can also lead to high capital gains taxes, which you will have to pay. You can buy balanced funds from most fund companies and brokerage firms.

Some funds have sales charges (load funds) and some do not (no-load funds).

Before we complete the tutorial on balanced funds, let's put together all you have learned.




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