After watching their accounts go down for three years, many investors are looking at balanced funds as a tool to get back into the stock market. Mutual Funds are sold by Prospectus only. Please carefully consider investment objectives, risks, charges, and expenses before investing. For this and other information please call to request a Prospectus. Please read it carefully before you invest. And who can blame them. A balanced fund holds both stocks and bonds and therefore is supposed to be able to do well in any investment climate.
In addition, there is a fund manager who decides what balance of stocks and bonds is appropriate. However, there are some flaws in this strategy. Some flaws that you should be aware of before you invest.
Does the fund manager know about all of your assets, your income needs, or your tax situation? Of course not. Suppose the majority of your other investments are in equities and the manager of your balanced fund gets out of bonds and into stocks. Now you are not properly diversified. If interest rates should drop, you would miss out on any bond rally.
Balanced funds often have the ability to hold stocks and bonds with aboveaverage risk. This means that the bond side of the portfolio could take a severe hit if interest rates go up. In anticipation of this, managers could make abrupt changes in the asset mix and even generate short-term taxable gains that may be passed on to you.
Owning a balance of stocks and bonds still is the prudent way to invest. But you need to control how that balance is proportioned, not a fund manager whom you have never even met.
Before you fall for the sales pitch that balanced funds will take the risk out of investing in the stock market, let’s meet. Together, we can put together a tax efficient portfolio that will focus on your current and future needs. Just return the enclosed coupon to schedule an appointment.
