Fund Category
Figuring out our investment allocation strategy can be a lot like filling out an online dating profile. We have to answer a lot of the same questions:
Are we looking for stability and security?
Do we like to take risks?
Are we looking for a fling or something more long-term?
Where do we see ourselves in 20 years?
Do we like cats?
Okay, that last one might not play too heavily into our investment strategies. Sorry, Fluffy. But the rest of them sure will, which is why it’s so handy that fund categories exist. They're basically a way of organizing mutual funds according to what they do and/or how they do it. Sometimes these fund categories can be simple—a stock category and a bond category—but sometimes, they can get more complex.
For example, if we’re not planning to retire for another 40 years, we might be willing to get a little risky with our investments, since we have plenty of time to try and make up any losses. Knowing this, we might ask our investment broker to allocate a greater amount of our overall mutual fund portfolio toward a more high-risk fund category.
Or if long-term growth potential is what we’re really into these days, we can allocate more toward that type of fund category. Or if we just can’t even with these types of high-stress financial decisions, we can hire firms who specialize in managing portfolios with predetermined fund category allocation levels.
Related or Semi-related Video
Finance: What are Balanced Funds?37 Views
Finance a la shmoop what are balanced funds? well this is a teeter
and this is a totter and this thing here is the fulcrum and here's you madam [Woman sitting on the fulcrum]
imbalanced funds sitting in the middle a gentle breeze sways you left toward a
little more yield or interest on bond investments and then another breeze
sways you right toward a little more growth or capital appreciation from [woman swaying right]
equities a balanced fund is a type of mutual or index fund which generally
keeps an even ish mix of growth and income for investors who don't want the
volatile sharp rocky mountain peaks and valleys that growth only throws at you [Growth chart with peaks and valleys]
but well they want a bit more excitement than all bonds got it or rather they can
handle a bit more risk in their lives than what a simple bond income fund
would deliver to them you know a whole lot of boring yield balance is almost [Woman balancing]
always good for zen.. oops didn't see that breeze coming
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