Tuesday, January 13, 2009
Investing in Balanced Fund is a Better Option
Keep your emotions on check, a strict warning for those investors who loves to invest in this volatile market. When the markets are in good condition then our instincts compels us to join the market but when the market is down we are prone to sell out in panic. The best thing for the investors to do at this time is to remain quiet and keep track on their financial approach for the investments. The most effective strategy is to keep an investment portfolio invested across different assets classes.
A balanced fund which is invested in both share equities and investment bonds in equal proportions should be considered for holding a balanced fund. If we compare the same with equity funds that is suppose 85% the balance will be in fixed income securities and liquid assets.
The most important benefits of investing in balanced funds is that it gives you more stable returns because overall portfolio risk of a balanced fund is reduce automatically. The potentially higher but more volatile returns from equity investments are moderated by the fund’s investment in bonds. Secondly, it helps you to rebalance the portfolio by taking profits on equity investments which have appreciated and re balancing the portfolio to its original equity: bond asset allocation of 60:40.
Always keep in mind that a balanced fund will allow the investors to participate in long term capital growth of equity markets because a sizable portion of up to 60% of the fund is invested in equities. Investing in a balanced fund helps unit trust investors stay focused on achieving their long term investment goals without requiring them to evaluate the prevailing market cycle.