Your Balanced Fund May Be Riskier Than You Think

Your Balanced Fund May Be Riskier Than You Think

According to the WSJ in an article this morning entitled “Balanced Funds Tilt Toward Stocks, While Investors Want to Scale Back”:

“Among fund managers with the flexibility to invest in a mix of stocks, bonds and other assets, the trend has been stocks, stocks and more stocks. According to the latest data available from fund researcher Morningstar Inc., stocks represented 55% of the average allocation fund at the end of August, up almost five percentage points from the start of the year and up from 41% at the end of 2009.”


“The division between investors’ actions and those of the managers who run their money is only more pronounced in the international arena. Among funds that invest in a mix of global stocks and bonds, stocks made up 58% of portfolios at the end of last month, up from 37% at the end of 2009, according to the Morningstar figures.”


“Some funds have made even more significant shifts: The $75 billion American Funds Capital Income Builder’s stock allocation has risen to 73% from 64% at the end of 2009, the $10.8 billion T. Rowe Price Capital Appreciation Fund’s stake is up to 72% from 65%, and the $1.1 billion Templeton Global Balanced Fund’s stock portion is at 63%, up from 46%.”

You would think that with the trend of the market going down funds that have flexibility would be moving out of stocks and getting less risky. It seems that the opposite is true. There are times in the market where it pays to take more risk (2003, 2009) and then there are times like now when it doesn’t.

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