Best Balanced Funds for Long-Term Investors
Top Balanced Funds to Buy for the Long Run
Balanced funds are mutual funds that invest in assets for a specific risk type, such as conservative, moderate, or aggressive. There are dozens of different balanced funds to choose from, including a wide range of actively-managed and passively-managed types. The best balanced mutual funds are almost always the kind that investors can hold for years or even decades.
Top balanced funds will have the most important qualities that you'll find in any other type of mutual fund, so investors should only consider no-load funds with low expense ratios—especially when buying index balanced funds. If the funds are actively-managed, higher expense ratios can be justified, but there are plenty of outstanding balanced funds with active management that have low expenses.
Defining Balanced Funds
Most basic balanced funds contain stocks, bonds, and cash, but investment experts might include precious metals like gold and silver, and commodities like oil, under the heading of asset types. Because of the balance of assets, balanced funds are like investing in multiple mutual funds at once. Like other types of funds, balanced funds usually have a stated objective that's spelled out in the fund prospectus and in online information that can easily be found on the fund's company website.
Most balanced funds are categorized according to their respective asset allocation. The three primary categories are conservative allocation, moderate allocation, and aggressive allocation. Conservative funds typically have an asset allocation of roughly 30% stocks, 50% bonds, and 20% cash; moderate allocation funds are generally 65% stocks and 35% bonds; aggressive funds will have around 80% stocks and 20% bonds.
Why Invest in Balanced Funds
Balanced funds can be used for a variety of investment objectives, tactics, and portfolio management purposes. They are often used as standalone investments for beginning investors wanting to get a good start with diversified mutual funds without having to meet the minimum initial investment amounts for multiple mutual funds.
Other investors may use balanced funds as core holdings in a portfolio of funds, where there may be several other funds added for diversity. For example, an investor might allocate the largest portion of their portfolio assets to the balanced fund, then build around it with smaller allocations to funds in other categories, such as foreign stock or sectors.
Balanced Funds to Buy for the Long-Term
While some conservative allocation funds can be used for short- to intermediate-term investing (1–5 years), most types of mutual funds, including balanced funds, are most suitable for long-term investing (10 years or more). Here are some good options for balanced funds to buy and hold for the long run. We'll start with conservative funds, then progress to moderate and aggressive:
Vanguard LifeStrategy Conservative Growth (VSCGX)
The asset allocation for this fund is approximately 40% stocks and 60% bonds. It allows for slow but steady growth over the long-term, which makes for a good conservative fund. VSCGX has an expense ratio of 0.12%, and the minimum initial investment is $3,000.
Vanguard Wellesley Income (VWINX)
Around for more than 40 years and one of the best conservative allocation funds on the market, the VWINX portfolio is solidly conservative with an allocation that ranges between 35–40% stocks, around 60% bonds, and the remainder in cash. As for performance, Wellesley beats at least 90% of other conservative allocation funds for 3-, 5- and 10-year returns. Returns have averaged nearly 7%, which matches many funds that invest 100% in stocks. It has an expense ratio of 0.23%, and the minimum initial investment is $3,000.
Vanguard Wellington (VWELX)
This fund has been around since 1929 and is still a solid fund to buy. The asset allocation for VWELX is categorized as moderate allocation because it holds approximately 65% stocks and 32% bonds. The expense ratio is 0.25%, and the minimum initial investment is $3,000.
Vanguard Balanced Index (VBINX)
If you want a low-cost, no-load index fund that holds a moderate mix of stocks and bonds, look no further than VBINX. With a low expense ratio of 0.18% and a balance of 60% stocks and 40% bonds, VBINX makes for an outstanding core holding in a diversified portfolio or a standalone investment for beginners. Long-term returns have averaged between 6–8%, which is good for a medium-risk investment of any kind. The minimum initial investment is $3,000.
Vanguard STAR (VGSTX)
At $1,000, this fund has a lower minimum initial investment than most Vanguard funds. It's known as a "fund of funds," which means it invests in other mutual funds, all in one fund option. The STAR fund invests in a diversified mix of 10 Vanguard funds, making it a solid standalone option for beginning investors or those wanting a single fund solution for investing. It has an expense ratio of 0.31%.
Fidelity Balanced (FBALX)
One of the best-balanced funds with a moderate allocation, the FBALX portfolio typically invests at least 60% of its portfolio assets in stocks and at least 25% in bonds, with the remainder in cash. It is an actively-managed fund with a history of beating category averages with long-term returns of 7% or higher. The expense ratio is a bargain for quality management at 0.53%, and there is no minimum initial investment.
T. Rowe Price Personal Strategies Income (PRSIX)
This actively-managed fund invests its portfolio in a mix of assets that consists of roughly 40% stocks, 55% bonds and cash, and 5% alternative investments. The fund's objective is first for income and next for capital growth. The minimum initial investment is $2,500, and the expense ratio is 0.62%.
Bruce Fund (BRUFX)
With a blend of about 70% stocks, and nearly 30% bonds and cash, this fund with active management can achieve above-average returns with below-average risk. Just be ready to receive sub-par returns at times in the short-run in extreme market conditions. The expense ratio is 0.68%, and the minimum initial investment is $1,000.
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.
Vanguard. "Vanguard LifeStrategy Conservative Growth Fund (VSCGX)." Accessed Aug. 28, 2020.
Vanguard. "Vanguard Wellesley Income Fund Investor Shares (VWINX)." Accessed Aug. 28, 2020.
Vanguard. "Vanguard Wellington Fund Investor Shares (VWELX)." Accessed Aug. 28, 2020.
Vanguard. "Vanguard Balanced Index Fund Investor Shares (VBINX)." Accessed Aug. 28, 2020.
Vanguard. "Vanguard STAR Fund (VGSTX)." Accessed Aug. 28, 2020.
Fidelity. "Fidelity Balanced Fund." Accessed Aug. 28, 2020.
T. Rowe Price. "T. Rowe Price Spectrum Conservative Allocation Fund." Accessed Aug. 28, 2020.
Yahoo Finance. "Bruce Fund (BRUFX)." Accessed Aug. 28, 2020.
Morningstar. "Bruce BRUFX." Accessed Aug. 28, 2020.