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401(k) Fact |
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Across all worker categories and at every earnings level, women are more likely to participate in an employer-sponsored retirement plan than men. But overall they contribute less money, which experts attribute in part to lower earnings and fewer full-time jobs. |
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Balanced funds are the most truly diversified mutual funds because they invest in stocks, preferred stocks and bonds in order to provide both potential growth and current income. By holding both asset classes, balanced funds tend to be less volatile than either pure stock or pure bond funds.
The major drawback of a balanced fund may be that it tends to under-perform pure stock funds in a bull market because only a portion of the fund’s assets is invested in stock. The average stock allocation, which is typically about 60 percent of the total portfolio, is spelled out in the fund’s prospectus, along with any limits the fund manager must follow.
For example, a manager may have the right to shift investments in changing economic environments but be required to keep a minimum of 25 percent in stocks or bonds at any given time.
Changes in the current interest rate may also affect a balanced fund’s performance, especially if the fund is invested in long-term bonds in a period when interest rates are rising. That will tend to reduce the fund’s total return.
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