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10 Great Balanced Funds

There are plenty of funds to like in our new allocation 50% to 70% equity Morningstar Category.

We have overhauled our allocation Morningstar Categories. Our three former categories--conservative allocation, moderate allocation, and aggressive allocation--have been spliced into five new categories. The new categories are allocation--15% to 30% equity; allocation--30% to 50% equity; allocation--50% to 70% equity; allocation--70% to 85% equity; and allocation--85%+ equity.

The move reflects the growth in allocation funds and, in particular, funds of funds. A fund of funds with 85% equity can behave rather differently than a large-blend fund with 85% equity plus some bonds and cash, because the fund of funds may have multiple equity strategies, including foreign equity, thus covering a much wider swath of the market.

We opted for names that used the percentage of equity rather than words like "moderate" or "conservative" because equity risk is only one form of risk. Quite a few income-oriented funds in the old conservative-allocation group took on a lot of credit risk in order to boost their yield. So they may be conservative with regard to equity risk, but their overall profile may be fairly risky.

We also wanted to carve up the categories into more-narrow bands because that will make the ratings and relative performance rankings more meaningful. Ideally, they reflect skill rather than a set bias toward one end of the allocation spectrum.

A couple of weeks ago, I looked at the most equity-heavy allocation categories, so today I'll look at some of the best in the 50% to 70% equity group.

Picks of the Crop

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About the Author

Russel Kinnel

Director
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Russel Kinnel is director of ratings, manager research, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He heads the North American Medalist Rating Committee, which vets the Morningstar Medalist Rating™ for funds. He is the editor of Morningstar FundInvestor, a monthly newsletter, and has published a number of prominent studies of the fund industry covering subjects such as manager investment, expenses, and investor returns.

Since joining Morningstar in 1994, Kinnel has analyzed virtually every type of fund and has covered the most prominent fund families, including Fidelity, T. Rowe Price, and Vanguard. He has led studies on the predictive power of fund data and helped develop the Morningstar Rating for funds and the Morningstar Style Box methodology. He was co-author of the company's first book, Morningstar Guide to Mutual Funds: 5-Star Strategies for Success (Wiley, 2003), and was author of the book Fund Spy: Morningstar's Inside Secrets to Selecting Mutual Funds That Outperform, published in 2009.

Kinnel holds a bachelor's degree in economics and journalism from the University of Wisconsin.

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