"Of Mutual Interest"-Penelope Wang, Senior Writer, "Money" Magazine
Tuesday, March 17, 2009PAUL KANGAS: In tonight's "Of Mutual Interest" segment, we're focusing on an often-overlooked category -- balanced funds. They could be a good option for timid investors looking to dip their toe back in the market without a lot of risk. Joining us is Penelope Wang, senior writer at "Money" magazine. Penny, welcome back to the program.
PENELOPE WANG, SR. WRITER, MONEY MAGAZINE: Hi, Paul.
KANGAS: What exactly are balanced funds?
WANG: Well, balanced funds are all-in-one portfolios that hold a mix of stocks and bonds. They come in different varieties. Some are more conservative or aggressive than others but a typical fund might have a 60 percent allocation to stocks and 40 percent to bonds.
KANGAS: Who should be looking at buying this type of a fund?
WANG: Well, anyone who is looking to stay invested in this crazy market without taking on too much risk. With balanced funds, you get most of the returns of the market but in market downturns, the bonds can act as a cushion so the most conservative balanced funds have only lost about half as much as the market as a whole over the past year.
KANGAS: So that's one of the benefits of a fund like that in this type of a market? Anything else you can think of?
WANG: There also are very simple investments since the manager keeps the fund balance to whatever the allocation is so it's pretty easy for investors just to buy one of these funds and not have to do much else.
KANGAS: There must be some drawbacks. It seems like there always are when you get some advantages.
WANG: Well, sure. With balanced funds, you're limited to the allocation that the manager of that fund chooses. So if you should want to have a more -- a different portfolio, you would need to buy additional funds or switch out of the balanced fund to a portfolio that you choose.
KANGAS: What specific balanced funds do you recommend?
WANG: On "Money" magazine we like FPA Crescent. (FBACX) is the ticker symbol.
KANGAS: Yes. We have a chart up and it's had a rough time of it.
WANG: That's right. It hasn't escaped the ravages of the market. But over five and 10 years, it's delivered positive returns while the market as a whole is still in negative territory.
KANGAS: OK. We have a minute left. How about another choice?
WANG: We also like Oakmark Equity and Income (OAKBX).
KANGAS: Another fund that's had a rough time of it, but this is the time to buy, right? WANG: That's right. And over five and 10 years, it's done quite well. It has a 7 percent annual average return over 10 years.
KANGAS: OAKBX and that is the symbol on that one, correct?
WANG: That's right.
KANGAS: Penny, do you own these funds yourself personally?
WANG: No, I do not.
KANGAS: You can't own 'em all, can you?
WANG: Unfortunately, not.
KANGAS: Any final thoughts? We have a few seconds left for our viewers.
WANG: I think for investors who want a simple way to get started in the market or stay invested, a balanced fund is a pretty all-in-one easy decision way to go.
KANGAS: The weight is usually heavier in stocks than in bonds, correct?
WANG: That's right.
KANGAS: So this is a time maybe to be buying because of the sharp drop in the stock market?
WANG: That's right.
KANGAS: OK. Penelope, thanks very much for being with us.
WANG: Thanks, Paul.
KANGAS: Penny Wang, senior writer at "Money" magazine.
