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Two Balanced Funds for Unbalanced Times

06/09/2010 12:00 pm EST

Focus: FUNDS

Jim Lowell

Senior Partner & Chief Investment Strategist, Adviser Investments

Jim Lowell, editor-in-chief of Fidelity Investor, says we’re in a correction, but there’s a lot of fear and he recommends a couple of balanced funds to tide investors over.

The first correction since March of last year came on cue, as did the escalation of fear and uncertainty. At such moments, feeling as if you’re reliving the market crash of 2008-2009 all over again, and hence projecting that fear of the past into the future, is understandable.

But, for fundamental reasons, where I think we are is where I said I’d thought we’d be: facing a rational 15% or so re-pricing based on new factors that challenge the untenable assumptions of priced-in perfection.

Still, all markets will remain on the tenterhook of Europe, and Europe’s pox upon the global house remains unsettling. Our own banking system’s continued dependency on a sustained turnaround and up tick in business and consumer borrowing, especially relating to home buying, is still putting a floor in.

More to the emotional point, the feeling of being crash prone is part of the cycle of recovery, too. And, I think similar to the way the Depression left its indelible mark on the psyche of my grandparents, the crash of 2008-2009 will likely leave a lasting impression on most investors. The key will be keeping fear in check while acknowledging the role uncertainty plays in building a better future.

Against such backdrops, earnings and economic data continue to improve at least marginally, but on average measurably. Despite what we’re seeing in Europe and the global knock-on of uncertainty, there is nothing in the hard data, our discipline, or the cyclical recovery itself, to suggest anything other than a hard slog higher.

Fidelity Global Balanced (FGBLX)—Buy. Man­agers Ruben Calderon and Geoff Stein invest in stocks and bonds from around the globe. They invest at least 25% in fixed income senior securities. Foreign investments make up 61.6% of the hold­ings. The top three country representa­tions are the US (38.4%), Japan (17%), and United Kingdom (9.1%). It began trading in February 1993 and has a mar­ket value of $450 million. The top three sectors are financials (13.3%), informa­tion technology (10.9%), and industrials (9.3%). Stocks: 64.5%, bonds: 31.7%, cash: 3.8%.

Fidelity Puritan (FPURX)—Buy. Managers Ra­min Arani and George Fischer invest about 60% in equities, and the rest in bond investments. They invest at least 25% in fixed income senior securities.

Foreign investments make up 6% of the holdings. It began trading in April 1947 and has a market value of over $17 billion. The top three sectors are information technology (12.7%), financials (9.4%), and consumer discretionary (9%). One of the first fund ships to set sail, it’s a balanced blend of highest quality holdings. As such, it can play the role as a core, defensive hold­ing.

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