Top Funds with a Bolder Mix of Stocks and Bonds
Our Premium Fund Screener picks a dozen moderate-allocation winners.
Morningstar recently introduced a spate of new mutual fund categories. Two of the new categories, moderate allocation and conservative allocation, replaced our old domestic-hybrid category. Weighing in at nearly 400 funds, the domestic-hybrid peer group was large, and because Morningstar categories are designed to facilitate comparisons between similar funds, it made sense to distinguish mild-mannered hybrid offerings from their racier cousins. Thus, conservative-allocation funds are those that concentrate 50% to 80% of their assets in fixed-income instruments and cash. Moderate-allocation offerings, on the other hand, tend to stash 50% to 70% of assets in equities.
Funds mixing stocks and bonds can make great core holdings. They're a generally temperate bunch as a rule, and as Vanguard's Joel Dickson explained at last month's Morningstar Investment Conference, allocation funds also offer a small tax advantage when compared with owning stock funds and bond funds separately.
Investors should bear in mind, however, that the categories are hardly monolithic. Some allocation offerings sport growth-oriented equity portfolios, while others favor value fare. Fixed-income orientation varies across the group, too. Most favor high-quality bonds, but some offerings--such as Dick Habermann's successful Fidelity Asset Manager (FASMX) charge--will invest significant sums in high-yield debt.
Shannon Zimmerman does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.