Definition of Balanced Fund

Balanced fund is the combination of the stock component, money market component, and a bond component in a single portfolio. This type of funds usually sticks to the fixed mix of bonds and stocks relatively, which shows either a conservative or moderate orientation of the portfolio.

Explanation

It is an ideal approach in order to diversify the exposure of risk associated with the investment. The bond portion of the portfolio helps the investor in offsetting the associated risk with the stock portion, providing the balanced investment to the investor.

The purpose of it is to facilitate investors for income growth, stock, and bond investment. The diversification ensures that balanced funds will manage downturns in the stock market without any big loss.

As a part of the asset allocation family, portfolio of balanced fund does not change their asset mix. Asset mix is the classification of assets within the portfolio.

So, balanced funds are actively managed funds allocation that allows investors to invest accordingly in the diversified portfolio.