Investors spooked by recent market volatility might want to consider so-called conservative allocation funds as a way to ease back into stocks, some experts say. These funds contain a mix of stocks and bonds, but generally invest less than half of their assets in equities. Instead, they focus on a range of fixed-income investments, cash, and sometimes commodities like gold.
"They do work well for people because they do moderate the highs and lows of the stock market, and often the bond and stock
markets move in opposite directions," says
Before selecting a fund in this category, Kinnel says it's important to understand each fund's strategy. Some have a strict income focus and rely on dividend-paying stocks and high-yield bonds to provide consistent income for their shareholders. Other funds are designed for playing defense in bear markets and may not shine as brightly in good times.
Many funds maintain a fairly active asset allocation strategy--meaning management will make bets on certain sectors of the market if they see fit, while others follow a fixed target allocation that generally remains the same in any environment. "Right now, active allocation seems really appealing," Kinnel says. "But it's hard to do that right, and you have to recognize that you could end up doing worse than a set mix."
Since its inception in 1970, the fund has returned an average of about 10 percent annually. Management works under tight allocation constraints.
This fund has a unique strategy that has produced an annualized return of almost 10 percent over the past decade. Management invests a fixed target percentage of its net assets in gold, silver, Swiss franc assets, stocks of U.S. and foreign real estate and natural resource companies, aggressive growth stocks, and fixed-income assets like treasuries. Generally, fixed-income securities make up the largest portion of the fund's total assets (35 percent) followed by gold (20 percent). The stock portfolio accounts for 30 percent of the fund's total assets, and investments in the Swiss franc make up 10 percent. Management also invests a small amount (5 percent) in silver. The fund charges 0.84 percent in annual fees.
Although this fund falls in the conservative allocation category, management's main focus is generating income for clients. This means management will venture into higher-risk sectors like high-yield bonds to meet that income mandate. "Every investment in the fund is aimed at generating income," says co-manager
This offering provides investors with a simple indexing strategy. All of
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