The Error-Proof Portfolio: Is Your 'Balanced' Fund Binging on Junk Bonds?
Some supposedly staid allocation funds have ventured down the credit-quality ladder.
Allocation funds--sometimes called balanced funds--are the workhorses in many investors' portfolios.
Combining stocks and bonds, they aim to provide investors with a well-diversified package in a single shot and can reduce the need for a lot of hands-on oversight. Such funds are typically rebalanced back to a target stock/bond mix so investors don't need to get their hands dirty making allocation changes. And because the equity portion of the portfolio often thrives when the bond piece is struggling, and vice versa, the funds' returns often chart a steady course. That makes them easy to own: Morningstar's various allocation categories (as well as target-date funds, which employ a similar concept) often have among the most impressive investor returns of any fund type.
Christine Benz does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.