A balanced fund is a type of hybrid fund which invests in two or more asset classes, explains fund expert Brian Kelly, mutual fund expert and editor of MoneyLetter.
The ratio of equities and fixed income may vary somewhat over time, but does not materially change, as is the case with other hybrid funds such as life-cycle, target-date, and actively managed asset allocation funds.
The latter group shifts its asset allocation in relation to investor age and changing risk/reward preferences, or in response to economic and investment market conditions.
The most typical asset allocation in a balanced fund is 60% stocks and 40% bonds. And again, typically, the stock portion is invested in low- to medium-risk securities, and the income portion in higher-quality bonds.
Within the equity sleeve of Fidelity Balanced Fund (FBALX), manager Robert Stansky chooses the managers for all sectors, and will swap out managers if performance is not satisfactory. Sector weightings, however, are kept in line with that of the S&P 500.
Hence, information technology is the lead sector in the stock portfolio, accounting for 18.8% of assets, followed by health care, financials, consumer discretionary, and industrials (14.0% to 10.2% of assets). About 5% of assets are invested in foreign stocks.
Ford O’Neil has headed the fixed-income side since mid-2015, and runs it in the same manner as Fidelity Total Bond (FTBFX) — which he also manages.
He avoids big interest rate bets but does set the portfolio’s yield curve and sector exposure based on a macro framework. More than half of bond assets are in US Government debt, with the next largest exposure by quality being in the A/BBB range.
