Balanced fund

A  balanced fund is a mutual fund that holds multiple asset classes in a single portfolio. Typically these funds hold a stock component; a bond component, and in some instances, a cash component. Some balanced funds may hold additional asset classes beyond these traditional asset classes, such as precious metals and commodities. Many balanced funds maintain a fixed asset allocation; some pursue a variable allocation policy, changing asset weightings according to market conditions. Target date funds are balanced funds that gradually change asset class weightings in harmony with an investor's changing need for a lower risk profile over time.

Types of balanced funds

 * Balanced fund: Many balanced funds directly hold investments such as stocks and  bonds. These type funds are designed to hold a specified range of asset allocations for each asset. For example, one balanced fund may have a policy of investing between 60% - 65% stocks and 35% - 40% bonds; while another balanced fund may have a policy of investing 30% in stocks and 70% in bonds. Balanced funds can be either actively managed or indexed.
 * Fund of funds: A number of balanced funds do not hold individual securities, but rather hold shares in other mutual funds or exchange traded funds. These type funds are known as  fund of funds. The underlying funds are usually funds offered by a fund family, but some fund of funds select mutual funds from numerous fund families. The SEC requires that fund of funds account for the expenses incurred by the underlying funds as  acquired fund fees. The fund may also charge a direct  expense ratio for managing the fund. The underlying funds can be either actively managed or indexed.
 * Life cycle fund: Life cycle funds are a group of funds holding varying ranges of fixed stock/bond allocations reflecting various risk levels. These are usually labeled as conservative, moderate, or aggressive portfolios. These funds are primarily designed for retirement and 529 college savings plans. They are often structured as fund of funds. The underlying funds can be either actively managed or indexed.
 * Target date fund: These funds hold a mix of stocks and bonds that gradually shifts from higher stock allocations to lower stock allocations over time. The target date is set either for a given investor's projected retirement age or for a term ending at a time when the portfolio assets are needed for a targeted payout date. Thus,  target date funds are primarily designed for retirement and 529 college savings plans. Different fund family's can have widely different asset allocations for the same target year, so it is always advisable to check the underlying asset allocation of a target fund, rather than relying on a fund's target date. Target funds are often designed as fund of funds, with the underlying funds being either actively managed or indexed.
 *  Asset allocation fund: Instead of holding fixed allocations to stocks, bonds, and cash, an asset allocation fund allows the manager to vary the fund allocations according to market conditions.