Originally created 07/18/04

Outstanding balanced funds for small investors

If you're not sure where to invest in the current market, a balanced mutual fund that combines both stocks and bonds can be an easy solution. Whether you're socking away money in a tax-advantaged retirement account or building up long-term savings, putting a broadly diversified balanced fund at the center of your portfolio can help focus your investment strategy.

As always, keep your own time horizon and tolerance for risk in mind, and look for stable management, a disciplined approach, low expenses and solid performance compared to similar funds.

Balanced funds recommended by industry tracker Morningstar Inc. include:

-Dodge & Cox Balanced (DODBX) has a long-tenured management team, low expenses and a solid track record. Costs and volatility are limited by a value-oriented style and low-turnover. The portfolio is typically 60 percent to 65 percent stocks, though a bias toward value can be a burden when growth leads the way. The fixed income portion sticks to government and mid-quality corporate bonds.

-T. Rowe Price Balanced (RPBAX) has consistently above-average performance, low volatility and low expenses. Its manager, in place since 1991, maintains a relatively heavy 65 percent stake in equities, with solid exposure to foreign stocks and high yield bonds.

-Vanguard Wellington (VWELX) has a solid long-term performance record, experienced managers and rock-bottom fees. The fund keeps 60 percent to 70 percent of its holdings in stocks, focusing on value-oriented, dividend-paying issues. Typically lighter on technology shares, Wellington may perform less well in growth-driven markets. A tendency toward longer bond durations makes it more interest-rate sensitive than its peers.

-Fidelity Asset Manager (FASMX) has low expenses, stable management and a disciplined strategy that limits risk, but its modest equity approach makes it a more conservative choice. It currently holds a mix of 46 percent stocks, 26 percent bonds and almost 20 percent cash. The stock portfolio focuses mainly on under-valued large-caps with good prospects for growth. The fixed income portion is managed conservatively, mostly in investment-grade bonds.

On the Net:

Fund industry tracker www.morningstar.com


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