Most traditional financial planners advocate de-risking your portfolio as you approach your retirement. It’s a reasonable rule of thumb, but some investors may prefer to remain aggressively invested (especially those with pensions) to grow inheritable or legacy wealth. Other times it may be more important for an investor to focus on capital preservation and making sure their spending power keeps pace with inflation. The best balanced funds for retirement can serve a variety of these needs and have their place in many portfolios.
The intention around your investments is a very important part of why you invest. When talking about investing for retirement, you hear a lot about your retirement horizon or your investing horizon. This simply means how much time you have to invest before you start taking money out of your investments to spend in retirement.
So both the intention and the timeframe you’re working within are worthy considerations. If you have more time to invest, you can withstand a little more volatility that will come with more aggressive investing styles. Again, though, a balanced fund can give you both stability and growth.
What to look for in the best balanced funds for retirement
A classic balanced fund will operate with something close to 60% stocks and 40% bonds. Usually, a small percentage of the fund will also be put into cash equivalent investments. Still, some balanced funds will take a different approach and use other holdings to create the security and the upside that a balanced fund should provide.
Some balanced funds will change the generic 60-40 formula dramatically while still upholding the balanced driven criteria. Despite the distribution of a fund’s investments, one thing you will usually want to see in a quality balanced fund is a robust yield. This means that your investments will be providing you with some cash that you can either take out of the investment or reinvest.
Recognize these examples of the best balanced funds for retirement
However you go about investing in your mutual funds, if the balanced fund style meets your needs, you want to find the best offerings out there. Here is a quick look at some of the best balanced funds for retirement on the market today.
American Funds American Balanced Fund (ABALX)
American Funds has a rich history of quality returns, and their American Balanced Fund is another feather in their cap. This balanced fund is unique in that it invests in safe fixed assets like treasuries and higher risk fixed assets like BBB rated bonds.
It also has a slightly higher cash holding than some balanced funds at 10%. Bonds and dividend-paying blue-chip stocks create a nice income on this balanced fund. Moving away from the fashionable index-style investing can be a good choice when working with a fund management team like American Funds.
Vanguard Balanced Index Fund Admiral Shares (VBIAX)
Vanguard is sure to have at least one fund (and we could put a few) in any best funds category. Their low expense ratios always make them a favorable option, and this fund, with a 0.07% expense ratio, is no exception.
This is a great option to get quick and easy diversification in your portfolio with over 3,000 different stocks and more than 8,000 bonds included across the two indexes this fund tracks.
Fidelity Freedom 2045 Fund (FFFGX)
A target-date fund makes a lot of sense for those who know precisely the investing horizon they are looking at. It is debatable whether this should be included as a balanced fund since it would start aggressively with more than a 20-year window. Still, with the automatic rebalancing and increased conservatism as retirement draws closer, it is a great option to mix aggression with safety at the right times.
What appeals to you most about a balanced fund? What questions do you have?
Nancy Zambell has spent 30 years educating and helping individual investors navigate the minefields of the financial industry. As a lecturer and educator, Nancy has led seminars for individual investors at the National Association of Investors, Investment Expo and the Money Show. She has also taught finance, economics and banking at the college level, and has been quoted extensively in The Wall Street Journal, Investor’s Business Daily, USA Today, and BusinessWeek. Now let her give you the tools and resources, including a monthly magazine, for gaining the peace-of-mind to live comfortably now and in retirement in her Cabot Money Club.Learn More >>
*This post has been updated from a previously published version.