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A few years ago, I wrote about balanced funds. These are the mutual funds that always contain a mixture of stocks, bonds and cash. Sometimes they are called moderate allocation funds.
Because of this blending of classes of investments, they may be considered somewhat boring in a hot market. The presence of bonds helps to provide stability when stocks are getting killed, and the stocks provide a growth kicker during the more normal periods of growth in the economy. (By the way, when was the last time we had a normal period? I can’t remember anymore.)
After the shellacking that growth funds have taken in the past two years, boring may be just what you are looking for. Because it has been a while, let’s revisit the group and see if they have performed as a dependable tortoise-like competitor should.
My favorite remains Oakmark Equity and Income Fund. Most recently it consisted of 62 percent stocks, 33 percent bonds and 5 percent cash. Of the bonds, the largest percentage held is U.S. Treasuries. This is fairly typical of these because, as lead manager Clyde McGregor explains, this is supposed to be an investment you would be happy to have your mother invested in, which he did until she passed on.
The American Century Balanced Fund had about 6 percent less in stocks and more in bonds as of Aug. 31. Its top 10 holdings are a nice slice of domestic behemoths, including Exxon Mobil, Johnson & Johnson, IBM and JP Morgan Chase, among others. The bonds have an average duration of only 4.3 years and average AA+ in quality. These are the reasons these funds have a big sleep-well component to them.
The elephant of the class is American Balanced Fund, with $46 billion under management. Its mix is about the same as Oakmark’s at this time, and its stock headliners are Microsoft, Chevron, Coca-Cola, Wells Fargo and Berkshire Hathaway. Its bonds have almost exactly the same duration and quality as the American Century. As you can see, the differences between the brands of Balanced Funds are not that earth-shaking.
Since Dec. 31, 2007, all three have beaten the performance of the higher octane stock mutual funds as we would hope and expect. Through last Friday, the 13th, the American Balanced is down 11.06 percent, the American Century Balanced has lost 7.92 percent and Oakmark’s entry is 3.82 percent lower. In the last 10 years, however, all three and their siblings have beaten the S&P 500 like a drum, or as Aesop would say, like the dependable tortoise over the hare.
A few years ago, I wrote about balanced funds. These are the mutual funds that always contain a mixture of stocks, bonds and cash. Sometimes they are called moderate allocation funds.
Because of this blending of classes of investments, they may be considered somewhat boring in a hot market. The presence of bonds helps to provide stability when stocks are getting killed, and the stocks provide a growth kicker during the more normal periods of growth in the economy. (By the way, when was the last time we had a normal period? I can’t remember anymore.)
After the shellacking that growth funds have taken in the past two years, boring may be just what you are looking for. Because it has been a while, let’s revisit the group and see if they have performed as a dependable tortoise-like competitor should.
My favorite remains Oakmark Equity and Income Fund. Most recently it consisted of 62 percent stocks, 33 percent bonds and 5 percent cash. Of the bonds, the largest percentage held is U.S. Treasuries. This is fairly typical of these because, as lead manager Clyde McGregor explains, this is supposed to be an investment you would be happy to have your mother invested in, which he did until she passed on.
The American Century Balanced Fund had about 6 percent less in stocks and more in bonds as of Aug. 31. Its top 10 holdings are a nice slice of domestic behemoths, including Exxon Mobil, Johnson & Johnson, IBM and JP Morgan Chase, among others. The bonds have an average duration of only 4.3 years and average AA+ in quality. These are the reasons these funds have a big sleep-well component to them.
The elephant of the class is American Balanced Fund, with $46 billion under management. Its mix is about the same as Oakmark’s at this time, and its stock headliners are Microsoft, Chevron, Coca-Cola, Wells Fargo and Berkshire Hathaway. Its bonds have almost exactly the same duration and quality as the American Century. As you can see, the differences between the brands of Balanced Funds are not that earth-shaking.
Since Dec. 31, 2007, all three have beaten the performance of the higher octane stock mutual funds as we would hope and expect. Through last Friday, the 13th, the American Balanced is down 11.06 percent, the American Century Balanced has lost 7.92 percent and Oakmark’s entry is 3.82 percent lower. In the last 10 years, however, all three and their siblings have beaten the S&P 500 like a drum, or as Aesop would say, like the dependable tortoise over the hare.
