The Asset Allocation Fund: One Stop Shopping
Asset Allocation funds can be described many ways but summed up in one word... Versatility. Many balanced funds that exist are going to keep a fairly fixed mixed of stock and bonds either in ratio (3:2) or percentage (60 percent stocks and 40% bonds). But an asset allocation fund will move money between asset classes so as to maximize profit potential. For instance, if bonds are climbing the fund manager may decide to invest more there and pull existing money from stocks to invest in bonds. The same goes in reverse. This allows flexibility and speed when managing money.
How much risk you are willing to take on, how much you can invest, how long you intend to invest and your age are all factors that will determine which fund is right for you. The nice thing about asset allocation funds is that they are essentially a single fund that can perform like several funds. Investors who can use these types of financial vehicles will be able to diversify their holdings and perhaps obtain more consistent returns. To some it may seem as if you are putting all of your eggs in one basket. This is to some degree true. ALWAYS seek advice from a professional before investing but this type of investment can at least give you a good taste of investing in many things from one stop. It will self adjust rather than you having to "sell here" to "buy there."
Each fund in the allocation of assets varies in composition and opportunities. While the composition of the FMC Select Fund and PaineWebber Tactical Allocation funds performed far above the average, (57 percent return between 2001 and 2006) within different economies, different compositions will prosper. For conservative investors, you may want to stick to balanced funds, which will not make you rich quick but will build your savings over time.
As stated above, another fund type you can certainly look into is balanced funds but funds like a life-cycle or target date fund. These often will be more conservative in the fact that they start out with a mix of higher risk stocks, bonds and cash but move into more conservative investments as you get older or get closer to the fund target date. The idea being that the younger you are the more you can risk because you have a whole working life to make up potential losses. The older you are the less time you have to earn back losses.
Whatever you choose, choose wisely. It is a must to get fund information and an up to date prospectus. Read through them and do your homework. Money does not make itself! Seek out an adviser, ask questions and you will certainly come out on top.
Article Source: FxTradingStock.com
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Learn more about asset allocation funds. Stop by Jonathan Silvers's site where you can find out all about asset allocation mutual funds and what they can do for you.
by: Jonathan Silvers
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Date: Fri, 11 Jun 2010
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