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Stuck in the Middle Not a Bad Place to Be With These Funds

A handful of analyst-recommended moderate-allocation funds have proved their mettle in good times and bad.

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With so much attention paid to selecting the right stock or bond fund, investors often seem to give short shrift to the humble allocation fund. These funds, formerly called balanced funds in the Morningstar lexicon, hold significant allocations to both stocks and bonds. Furthermore, they can act as a one-stop option for investors looking for a single investment vehicle to provide some of the return potential of stocks with some of the diversification and volatility-reducing qualities of bonds. (Of course, that bond exposure also brings with it interest-rate exposure, which could weigh on allocation-fund performance if rates continue to rise.)

Morningstar groups allocation funds into conservative (20%-50% equity exposure), moderate (50%-70% equity), and aggressive (70%-90% equity) categories. The biggest of these categories is moderate allocation, with more than 250 funds available. 

Adam Zoll does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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