Janet M. Brown
Janet M. Brown is the president of the FundX Investment Group and managing editor of the NoLoad FundX newsletter, San Francisco. FundX.com
Many investors never bother adjusting their portfolios to restore their desired balance of stocks versus bonds, even when stocks have soared, as they have in recent years. But there is a type of mutual fund that does the rebalancing for you. Balanced funds invest in both stocks and bonds—in many cases, around 60% large-cap stocks and 40% high-quality government and corporate bonds, although many balanced funds have leeway to stray from the standard mix. This formula provides a cushion of safety along with potential for strong gains and significant yields. You even might choose a balanced fund as your only fund.
Three attractive balanced funds…
Hennessy Equity and Income (HEIFX), which outperformed 89% of funds in its category over the past five years, keeps about 60% of its portfolio in stocks, especially dividend-paying stocks. It puts the rest in bonds and cash and is willing to hold higher levels of cash than most other balanced funds do, recently about 7% of total assets. 10-year annualized return: 7.9%.
Fidelity Puritan (FPURX) has outperformed 95% of funds in its category over the past five years by combining an aggressive stock strategy with a cautious bond strategy. It emphasizes blue chip growth stocks such as Apple and Microsoft. 10-year annualized return: 7.2%.
Dodge & Cox Balanced (DODBX), which can devote as much as 75% or as little as 25% of its portfolio to stocks, outperformed 97% of funds in its category over the past five years. It tends to be more volatile than the standard balanced fund and often invests in out-of-favor stocks, including Hewlett-Packard and Target. 10-year annualized return: 6.6%.
