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Although many investors have been getting out of their domestic equity investments and investing in bonds or emerging markets, safe-minded investors who can tolerate the risk of growth oriented investment would probably benefit from looking at balanced investment funds. As a more reasonable alternative, balanced investment funds offer a tremendous amount of benefits and can actually result in greater long-term returns than investing heavily into one asset class or another. Here are some of the ways balanced investments can outperform traditional growth investments or income investments.
1. Portfolio Flexibility. With a balanced fund, for example, the portfolio manager will have the ability to shift weightings from one asset class to another fairly easily. This is done through extensive research and careful trade execution, but the biggest benefit that most investors will find with a balanced investment is that the decision will be out of their hands in the hands of a professional manager. The flexibility that comes with these investments as well as the professional management means that individual investors are no longer guessing following the popular money, but investing in a disciplined process.
2. Higher Yields. For growth investors looking for yield, a balanced investment will offer just that. Since these types of investments incorporate income as well as equity asset classes, there will always be income generated within the portfolio. This is extremely important for investors who want bond exposure without being fully exposed to the risks that bonds represent. As well, it helps investors who might not know all that much about bonds get out of having to make an educated decision about whether to buy longer term, mid term or short term maturities. Bonds combined with dividend paying securities will result in naturally higher yields within this type of investment versus strict equity or strict bond investments.
3. Appropriate Asset Mix. Investing in a well managed balanced investment means that the investor who likes to adjust his or her asset mix according to market and economic trends will have an automatic process in place to achieve that. Since most balanced fund managers will adjust their asset mix holdings according to market trends and signals, the investor is getting the "right" mix of assets... provided, of course, that the manager is bright and quick enough to recognize opportunity and differentiate it from risks.
These are just three of the very basic reasons why managed balanced investments are a great alternative to traditional, strict asset class investments, such as bonds and equities. At this point, they would most likely appeal most to investors who have gotten out of equities and sought out gains and security in bonds and emerging markets. For those with the right investment knowledge and risk tolerance, why not take the best of both bonds and equities and simplify the investment process by look at a balanced portfolio instead?
About this Author
--> Find out what makes Bond Fund investing so complicated right now and which ones are the top picks.
Chris has more than 17 years of financial services experience. He was instrumental in picking the Top Bond Fund for 2010 at the Mutual Fund Site. Visit MutualFundSite.org to find out what that top bond pick was and how it has performed so far this year!
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