History of Balanced Funds
The history of balanced funds is very interesting to me. Before the mutual funds, every investor tried his own lucks in selecting individual stocks. Although there are still many individual investors picking their own stocks, but mostly rely on mutual funds, exchange-traded funds, or closed-end funds for their investment needs.
Balanced funds or total return funds are those mutual funds with investments in equity and fixed income at the same time. One of the first such funds is the asset allocation funds. The weights between equity and fixed income are changing over time, depending on the views of the managing experts. When these experts think the equity markets are going to do well, then they allocate more capital in equity securities. If the experts think the fixed income securities are going to do well in the next period, they allocate more capital in the fixed income securities. However the experts have not done so well in predicting the proper weights between the equity and fixed income securities. So the financial institutions introduced the balanced funds with the fixed weights between equity securities and bonds. These settled the first chapter in balanced fund history.
When the one fixed weights of equity securities and bonds does not satisfy the need of all kinds of investors. The financial experts have believed that some people like growth funds (with more weights in equity securities) while the others like income funds (with more weights in bonds). So they introduced the style funds ranging from very aggressive growth, to aggressive growth, to moderate growth, and to conservative growth funds. These funds satisfied the investment community for a while.
Now the experts believe the people who should not be linked to a specific growth-category for his entire life. So they introduced a new type of funds – the target retirement funds. The weight of equity securities changes according the ages. The weights usually change from about 90% in equity securities for the young people to 10% in equity when people are close to their retirement ages.
Now what is the next wave for the balanced funds? I believe that they are the one-world funds. The history comes back to its original point but with higher technological flavors. The new round of balanced funds is the one-world funds which is mathematically optimized combinations among all investment asset classes ranging from equity, to bonds, to commodities, to real estates, to precious metals, and to long-life assets such as infrastructure facilities.
Balanced funds or total return funds are those mutual funds with investments in equity and fixed income at the same time. One of the first such funds is the asset allocation funds. The weights between equity and fixed income are changing over time, depending on the views of the managing experts. When these experts think the equity markets are going to do well, then they allocate more capital in equity securities. If the experts think the fixed income securities are going to do well in the next period, they allocate more capital in the fixed income securities. However the experts have not done so well in predicting the proper weights between the equity and fixed income securities. So the financial institutions introduced the balanced funds with the fixed weights between equity securities and bonds. These settled the first chapter in balanced fund history.
When the one fixed weights of equity securities and bonds does not satisfy the need of all kinds of investors. The financial experts have believed that some people like growth funds (with more weights in equity securities) while the others like income funds (with more weights in bonds). So they introduced the style funds ranging from very aggressive growth, to aggressive growth, to moderate growth, and to conservative growth funds. These funds satisfied the investment community for a while.
Now the experts believe the people who should not be linked to a specific growth-category for his entire life. So they introduced a new type of funds – the target retirement funds. The weight of equity securities changes according the ages. The weights usually change from about 90% in equity securities for the young people to 10% in equity when people are close to their retirement ages.
Now what is the next wave for the balanced funds? I believe that they are the one-world funds. The history comes back to its original point but with higher technological flavors. The new round of balanced funds is the one-world funds which is mathematically optimized combinations among all investment asset classes ranging from equity, to bonds, to commodities, to real estates, to precious metals, and to long-life assets such as infrastructure facilities.
posted by Unknown at 7:25 AM
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