Investing in Your 20s and 30s for Dummies by Tyson Eric;

Author:Tyson, Eric; [Tyson, Eric]
Language: eng
Format: epub
Publisher: John Wiley & Sons, Incorporated
Published: 2021-05-18T00:00:00+00:00

Balancing your act: Funds that combine stocks and bonds

Some funds — generally known as balanced funds — invest in both bonds and stocks. These funds are usually less risky and less volatile than funds that invest exclusively in stocks. In an economic downturn, bonds usually hold value better than stocks do.

Balanced funds make it easier for investors who are skittish about investing in stocks to hold stocks because they reduce the volatility that normally comes with pure stock funds. Because of their extensive diversification, balanced funds are also excellent choices for an investor who doesn’t have much money to start with.

Balanced funds are less appropriate for some investors who purchase funds outside tax-sheltered retirement accounts because these funds pay decent dividends from the bonds that they hold. With the exception of the Vanguard Tax-Managed Balanced Fund, which holds federal-tax-free bonds, you should avoid balanced funds if you’re in a higher tax bracket. Consider buying separate tax-friendly stock funds and tax-free bond funds to create your own balanced portfolio.

Here’s my short list of great balanced funds:

Dodge & Cox Balanced (800-621-3979; www.dodgeandcox.com)

Fidelity Freedom Funds and Fidelity Puritan (800-343-3548; www.fidelity.com)

T. Rowe Price Balanced and Retirement Funds (800-638-5660; www.troweprice.com)

Vanguard LifeStrategy Funds, Target Retirement Funds, Wellesley Income, and Wellington (800-662-7447; www.vanguard.com)

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