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Balanced Fund or Asset Allocation by oneself ?

Mutual Funds, Hedge Funds and ETFs

Balanced Fund or Asset Allocation by oneself ?

Postby meldon » Fri Apr 26, 2013 10:29 am

A number of books have mentioned the importance of asset allocation. They also suggests a combination of equities (local & overseas), bond & cash, alternate (like: Gold / Property ... etc).

Just wonder why they suggest the readers to purchase balanced fund or growth fund instead ? From my understanding, balanced fund / growth fund have already diversified in different area.

Besides, is there any recommended book re asset allocation and mutual fund ?

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Balanced Fund or Asset Allocation by oneself ?

Postby kenzie » Fri Apr 26, 2013 10:57 am

Many of those funds are diversified, but within a category. For instance, a growth fund will be full of growth stocks, likely domestic ones. Most of these funds don't diversify across assets or locations.

You may want some growth, but also some small caps, some foreign, some bonds, commodities, currencies, etc. The allocation is based on your risk aversion and view of what will happen. Here you are "playing the market" a bit. If you don't want to play the market at all, just dump it into an s&p 500 index fund and be done with it.
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Balanced Fund or Asset Allocation by oneself ?

Postby devonn » Fri Apr 26, 2013 11:00 am

Over time the balanced fund produces a higher
rate of return with less risk. They invest mostly
in stocks and bonds with some foreign investments.
An asset allocation is similar, but also has cash
holdings. A growth fund is mainly invested in stocks
and diversified by holding many stocks.
Check out this link for investing in mutual funds.
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