Most mutual funds stick to a certain strategy. It might have to do with the asset class, i.e. a tech stock fund, or a U.S. Treasury Bond fund, etc. Or it might have to do with a particular outlook for the economy. Bull funds are meant to make money when things are going well; bear funds are meant to make money with things are in the toilet.
In general, these funds just do what they do. As an investor, you're supposed to figure out what you think is going to happen and then pick which of these funds will do well in that environment. Think real estate is ready to take off? Buy a fund based on real estate investment trusts. Think the euro is ready to tank? Buy into a euro bear fund.
But if you aren't too sure what's going to happen, then an all weather fund might be the choice for you. This category of mutual fund seeks to see at least acceptable returns no matter what goes on in the overall economy.
In some ways, this goal is something of a splitting-the-baby-type proposition. It's not really possible to create a strategy that's equally effective in all environments. If there was a fund manager who figured out how to make money in every economic situation, that person would eventually just end up owning everything. We'd be living in the United States of Warren Buffett or whatever.
Instead, the all weather funds just look to stay flexible. Unlike other funds, which tie themselves to a certain strategy or asset class, all weather funds have a broad variety of asset types that they invest in. They try to stay diversified and move funds around as needed to anticipate and respond to economic changes. The point is that, as an investor, it takes the pressure off you to try to read the tea leaves of the economy, because the all weather guys are taking steps to do it for you. It's a "set it and forget it" type of fund.
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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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