What Are Balanced Funds?
Do you know what balanced fund investments are and how they can help you in reaching your financial goals? Read this blog if you want to know more.
Source: Freepik
“I don’t know a lot about the investment market, but I would like to approach my future investment plans cautiously, “, said Andrew. When he thought of investing his money, he researched different investment options. That is when he first heard the term ‘Balanced Funds’.
Andrew investigated the advantages of investing in balanced funds and found it an excellent choice. Andrew has now entered the world of finance with strategic planning and research, seeking to achieve efficient benefits for his future.
Do you want to invest just like Andrew but aren’t sure about Balanced fund investments? If that is the case, this blog will assist you in sorting it all out. Learn more about balanced funds and how they can assist you in making wise financial decisions and building a solid investment portfolio.
What are balanced funds?
Before we get started, always remember the primary motive of investing is to safeguard the principal amount. You can diversify your portfolio but invest only after thorough research.
A well-balanced investment portfolio includes A balanced fund blends an equity component, a bond element, and a money market element. The money market is a market for short-term insurance with a maturity time of one year. And bonds are the financial instruments in which a lender loans money to a corporation or government for a certain period.
The balanced funds, also known as asset allocation funds, have lesser risks when compared with pure equity funds. The conventional balanced funds in Canada must invest the non-cash assets in between 5% and 90% in equity securities.
Who can invest in balanced funds?
Balanced funds are a great investment option for newbies. If you are looking for a one-fund solution and want to invest a smaller amount regularly, this is a brilliant choice.
You can test the waters of the investment market with balanced funds. If you successfully learn about it, you can further invest in GICs (Guaranteed Investment Certificates) or other bonds.
Balanced funds follow a fixed asset distribution of stocks and bonds. Thus, it is an opportunity for investment for individuals who want to have reliable savings and a fixed income.
Benefits of investing in balanced funds:
The investors who have a tough time accepting the difficulties of the stock market, balanced funds can offer them many benefits.
A few of the significant advantages of balanced funds are:
- Diversified and rebalanced portfolio.
- Minimized market risks.
- Easy account set-up and a good option for first-time investors.
- Allows you to make regular withdrawals.
- A balanced fund offers options to take systematic withdrawals in retirement.
- Lower expense ratio. The expense ratio is the fees charged for managing a mutual fund.
- Reduced volatility. The security value does not fluctuate radically.
What are the categories of balanced funds?
According to Canadian Investment Funds Standards Committee, here are the six categories of balanced funds you can invest in:
- Canadian Fixed Income Balanced
- Canadian Neutral Balanced
- Canadian Equity Balanced
- Global Fixed Income Balanced
- Global Neutral Balanced
- Global Equity Balanced
Tabular representation of balanced fund categories:
| Balanced fund category | Canadian content- geographic exposure (%) | Equity securities (%) |
| Canadian Fixed Income Balanced | ≥70 | 5-40 |
| Canadian Neutral Balanced | ≥70 | 40-60 |
| Canadian Equity Balanced | ≥70 | 60-90 |
| Global Fixed Income Balanced | <70 | 5-40 |
| Global Neutral Balanced | <70 | 40-60 |
| Global Equity Balanced | <70 | 60-90 |
We know that investing money can be daunting, especially if you have never done it before. But just as Andrew could start investing his money in Balanced funds, with comprehensive research, you can too!
You can make good financial decisions once you choose how you want to invest and know your risk tolerance. You now have a better understanding of balanced funds and why you should consider investing in them.
When it comes to investing, you should acquaint yourself with the several types of funds available. To learn more, read about the ‘Different types of mutual funds.’
