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401(k) Fact |
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The gender gap in retirement plan participation has been gradually shrinking since the late 1980s, when 51 percent of eligible men and 40.7 percent of eligible women participated in a plan. Today the percentages are closer to 49.4 percent of eligible men and 47.2 percent of eligible women. |
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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.
If you are automatically enrolled in your employer’s 401(k), you may find that a balanced fund is the Qualified Default Investment Alternative (QDIA) for your plan.
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