Balanced Funds: Also called hybrid funds or asset allocation funds, these are mutual funds that invest in a balanced asset allocation of stocks, bonds, and cash. The allocation usually remains fixed and invests according to a stated investment objective or style. For example, Fidelity Balanced Fund (FBALX) has an approximate asset allocation of 65% stocks and 35% bonds. It considered a medium risk or what industry experts might call a moderate portfolio. Vanguard also has an outstanding index balanced fund, Vanguard Balanced Index (VBINX), which is suitable for investors looking for moderate risk. Balanced funds can be ideal for beginning investors because they are well-diversified and can, therefore, be used as stand-alone investments or as core holdings to begin a larger portfolio.
Mutual Fund Fees Cover Administrative Costs. Mutual funds can offer streamlined investing but they’re not free. There are certain fees you have to be aware of when investing in mutual funds.
Mutual Funds Come in Many Varieties. A mutual fund comes in many types and styles. There are stock funds, bond funds, sector funds, target-date mutual funds, money market mutual funds and balanced funds. Mutual funds allow you to invest in the market whether you believe in active portfolio management (actively managed funds) or you prefer to buy a segment of the market with no interference from a manager (passive funds and index mutual funds). The availability of different types of mutual funds allows you to build a diversified portfolio at low cost and without much difficulty.
Best Funds for Beginning Investors. Whether you are just getting started investing or wanting to build a portfolio from the bottom up in the best way possible, there are a handful of outstanding mutual funds to get the job done. Choosing the best mutual funds for is much more than buying the best performers of the past year. Instead, investors are wise to know their investment objectives and future plans and prepare for a long-term strategy. For example, if you’re saving for retirement, it’s likely your time horizon is more than ten years. It means you can take more risk, which essentially means you will likely have more of your investment assets allocated to stock funds than bond funds.
In addition, retirement plans (IRAs, 401ks, etc.) are not impacted by capital gains distributions. There are also strategies to avoid the capital gains distributions including tax-loss harvesting and selling a mutual fund prior to the distribution. Are There Disadvantages of Mutual Funds? Are there disadvantages of mutual funds? Absolutely, there are disadvantages of mutual funds. There are advantages and disadvantages of investing in each and every investment vehicle. However, if you come across a list of the disadvantages of mutual funds, scrutinize each item on the list and determine if it applies as a disadvantage of mutual funds or a disadvantage of a particular mutual fund (or to investment vehicles as a whole regardless of the structure).