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Balanced funds are funds which have strategic allocations to both bonds and
stocks. Balanced funds can be quite useful as a temporary place to "park"
assets that are either being accumulated for more elaborate deployment, or
assets that are being temporarily stored for near-term spending. Balanced
funds may also be appropriate for those who value simplicity above all else.
There are many alternatives. Which is best?
The funds are
grouped by stock/bond allocation, and within stock/bond allocation, in rough order of our
overall preference.
Preferences are listed separately for use in
retirement accounts and for taxable accounts.
For a listing of our preferences in other asset classes, see
here.
Retirement Accounts (i.e., tax-deferred or tax-exempt accounts)
100% Stock Funds
100% stock funds aren't technically "balanced" because they include no bonds.
However, for individuals seeking a complete equity investing program in a single
fund, these funds fit the bill. These funds can be combined with bond
funds in whatever ratio you desire to form a simple, highly diversified,
two-fund, nearly complete investing program.
 | DFA Global Equity Portfolio (DGEIX). E/R: 0.25%. This
fund is a "fund of funds" which invests in several other DFA funds. It
has a strong "value" and "small" orientation. It includes foreign and
emerging market stocks, as well as REITs. It is rated higher than the
below funds due to its diversification and its "value"
and "small" tilt.
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| Vanguard Total World Stock Index Fund Admiral Shares (VTWAX). E/R: 0.10%.
This fund tracks the FTSE All-World Index. This fund is rated higher
than the below funds due to its diversification and low cost.
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| Avantis All Equity Markets ETF (AVGE). E/R: 0.23%.
This ETF is a "fund of funds" which invests in several other Avantis funds. It
has a "value" and "small" orientation. It includes foreign and
emerging market stocks, as well as REITs. It is rated higher than the
below funds due to its diversification and its "value"
and "small" tilt.
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| iShares MSCI ACWI Index Fund (ACWI). E/R: 0.32%.
This ETF tracks the MSCI All-Country World Index. This fund is rated
higher than the below funds due to its diversification.
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| DFA US Core Equity 1 Portfolio (DFEOX). E/R: 0.14%. This
fund is an "all cap" fund which is somewhat biased towards small and value
stocks.
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| DFA US Core Equity 2 Portfolio (DFQTX). E/R: 0.18%. This
fund is an "all cap" fund which is biased towards small and value stocks, moreso than DFEOX above.
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| DFA US Vector Equity Portfolio (DFVEX). E/R: 0.28%. This
fund is an "all cap" fund which is strongly biased towards small and value
stocks, moreso than DFQTX above.
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| Fidelity ZERO Total Market Index Fund (FZROX). E/R: 0.00%.
Minimum initial investment $10,000. This fund tracks the Fidelity U.S.
Total Investable Market Index. Obviously, the primary attraction of
this fund is its extraordinarily low expense ratio.
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| Vanguard Total Stock Market Index Fund Admiral shares (VTSAX).
E/R: 0.04%. This fund tracks
the CRSP US Total Market Index, which tracks the entire US stock
market.
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| Vanguard Total Stock Market Index ETF (VTI). E/R: 0.03%.
This ETF tracks the CRSP US Total Market Index, which tracks the entire US
stock market.
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| iShares Core S&P Total Stock Market ETF (ITOT). E/R: 0.03%. This ETF
tracks the S&P Total Market Index, which tracks virtually all of the
US stock market.
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| Schwab U.S. Broad Market ETF (SCHB). E/R: 0.03%.
This fund tracks the Dow Jones U.S. Broad Stock Market Index, which tracks the entire US stock
market.
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| SPDR Portfolio S&P 1500 Composite
Stock Market ETF (SPTM). E/R: 0.03%. This ETF
tracks the S&P Composite 1500 Index, which tracks virtually all of the
US stock market.
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| Vanguard Russell 3000 Index Fund ETF shares (VTHR). E/R: 0.10%.
This is the ETF share class of the Vanguard Russell 3000 Index Fund
Institutional Shares (VRTTX).
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| iShares Russell 3000 Fund (IWV). E/R: 0.20%. This ETF
tracks the Russell 3000 stock index, which tracks virtually all of
the US stock market.
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| iShares Dow Jones US ETF (IYY). E/R: 0.20%.
This ETF tracks the Dow Jones US Total Market Index, which tracks virtually
all of the US stock market.
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| Dimensional U.S. Equity ETF (DFUS). E/R: 0.09%.
This fund tracks the entire US stock market. |
90/10 Funds
| Vanguard Target Retirement 2065 Fund (VTXVX). E/R: 0.08%.
This fund is a "fund of funds" which invests in several other Vanguard index
funds, including foreign stocks. It gradually becomes increasingly
conservative as the year 2065 approaches.
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| Vanguard Target Retirement 2060 Fund (VTTSX). E/R: 0.08%.
This fund is a "fund of funds" which invests in several other Vanguard index
funds, including foreign stocks. It gradually becomes increasingly
conservative as the year 2060 approaches.
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| Vanguard Target Retirement 2055 Fund (VFFVX). E/R: 0.08%.
This fund is a "fund of funds" which invests in several other Vanguard index
funds, including foreign stocks. It gradually becomes increasingly
conservative as the year 2055 approaches.
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| Vanguard Target Retirement 2050 Fund (VFIFX). E/R: 0.08%.
This fund is a "fund of funds" which invests in several other Vanguard index
funds, including foreign stocks. It gradually becomes increasingly
conservative as the year 2050 approaches. |
85/15 Funds
| Vanguard Target Retirement 2045 Fund (VTIVX). E/R: 0.08%.
This fund is a "fund of funds" which invests in several other Vanguard index
funds, including foreign stocks. It gradually becomes increasingly
conservative as the year 2045 approaches.
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| Fidelity Multi-Asset Index Fund (FFNOX). E/R: 0.11%.
This fund is a "fund of funds" which invests in several other Fidelity index
funds. |
80/20 Funds
| Vanguard Target Retirement 2040 Fund (VFORX). E/R: 0.08%.
This fund is a "fund of funds" which invests in several other Vanguard index
funds, including foreign stocks. It gradually becomes increasingly
conservative as the year 2040 approaches.
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| Vanguard LifeStrategy Growth Fund (VASGX).
E/R: 0.14%. This fund is a "fund of funds" which invests in several
other Vanguard index funds in fixed allocations.
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| iShares Core Aggressive Allocation ETF (AOA). E/R: 0.15%.
This fund is a "fund of funds" which invests in several other
iShares index funds in fixed allocations. |
75/25 Funds
| Vanguard Target Retirement 2035 Fund (VTTHX). E/R: 0.08%.
This fund is a "fund of funds" which invests in several other Vanguard index
funds, including foreign stocks. It gradually becomes increasingly
conservative as the year 2035 approaches. |
70/30 Funds
| Vanguard Target Retirement 2030 Fund (VTHRX). E/R: 0.08%.
This fund is a "fund of funds" which invests in several other Vanguard index
funds, including foreign stocks. It gradually becomes increasingly
conservative as the year 2030 approaches. |
65/35 Funds
| Avantis Moderate Allocation ETF (AVMA). E/R: 0.21%.
This ETF is a "fund of funds" which invests in several other Avantis funds. It
has a "value" and "small" orientation. It includes foreign and
emerging market stocks, as well as REITs. |
60/40 Funds
| DFA Global Allocation 60/40 Portfolio (DGSIX). E/R: 0.24%. This
fund is a "fund of funds" which invests in several other DFA funds. The
equity portion is similar to that of the DFA Global Equity Fund (DGEIX) above.
The bond portion is split between several DFA bond funds.
It is rated higher than the below funds due to its stock portfolio's
diversification and "value" and "small" tilt, as well as
its bond portfolio's short duration.
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| Vanguard Target Retirement 2025 Fund (VTTVX). E/R: 0.08%.
This fund is a "fund of funds" which invests in several other Vanguard index
funds, including foreign stocks. It gradually becomes increasingly
conservative as the year 2025 approaches.
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| Vanguard LifeStrategy Moderate Growth Fund (VSMGX). E/R:
0.13%. This fund is a "fund of funds" which invests in several other
Vanguard index funds in fixed allocations.
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| iShares Core Growth Allocation ETF (AOR). E/R: 0.15%.
This fund is a "fund of funds" which invests in several other
iShares index funds in fixed allocations.
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| Vanguard Balanced Index Fund Admiral Shares (VBIAX). E/R: 0.07%. 60%
of this fund's assets are invested in a portfolio indexed to the MSCI US Broad
Market Index of US stocks and 40% of this fund's assets are invested in a
portfolio indexed to the Bloomberg Aggregate Bond Index. This fund is
rated below the above two Vanguard funds primarily because it is less
diversified (i.e., with no foreign holdings). |
50/50 Funds
| Vanguard Target Retirement 2020 Fund (VTWNX). E/R: 0.13%.
This fund is a "fund of funds" which invests in several other Vanguard index
funds, including foreign stocks. It gradually becomes increasingly
conservative as the year 2020 approaches.
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| Fidelity Balanced Allocation Fund (FRYBX).
E/R: 0.02%. This fund is a "fund of funds" which invests in several
other Fidelity index funds, including foreign stocks |
40/60 Funds
| Vanguard LifeStrategy Conservative Growth Fund (VSCGX).
E/R: 0.12%. This fund is a "fund of funds" which invests in
several other
Vanguard index funds in fixed allocations.
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| iShares Core Moderate Allocation ETF (AOM). E/R: 0.15%.
This fund is a "fund of funds" which invests in several other
iShares index funds in fixed allocations. |
30/70 Funds
| Vanguard Target Retirement Income Fund (VTINX). E/R: 0.08%.
This fund is a "fund of funds" which invests in several other Vanguard index
funds.
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| iShares Core Conservative Allocation ETF (AOK). E/R: 0.15%.
This fund is a "fund of funds" which invests in several other
iShares index funds in fixed allocations. |
25/75 Funds
| DFA Global Allocation 25/75 Portfolio (DGTSX). E/R: 0.25%. This fund is a
"fund of funds" which invests in several other DFA funds. The equity
portion is similar to that of the DFA Global Equity Fund (DGEIX) above.
The bond portion is split between several DFA bond funds.
We like it because of its stock portfolio's diversification and
"value" and "small" tilt, as well as its bond portfolio's short
duration. |
20/80 Funds
| Vanguard LifeStrategy Income Fund (VASIX). E/R: 0.11%.
This fund is a "fund of funds" which invests in several other
Vanguard index funds in fixed allocations. |
To our knowledge, there is only one good tax-managed balanced fund available.
If you feel you desire a "balanced" fund in a taxable account, here are some
considerations to think about:
| It is possible to get virtually any stock/bond allocation if you combine
the Vanguard Total World Stock Index Fund Admiral Shares (VTWAX) with a tax-exempt short-term bond fund. Such a
portfolio would be quite well diversified, simple, and tax-efficient.
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| If you use one of the "fund of funds" described above in a taxable account
and the fund invests a portion of its holdings in foreign stocks, you won't be
eligible for the foreign tax credit, which effectively lessens your net
returns on those foreign stocks. Funds of funds are not eligible to
claim the foreign tax credit.
|
| if you use one of the non-tax-managed balanced funds in a taxable account,
the fund will not be very tax-efficient. Most of the balanced funds'
stock components are quite (capital gains) tax-efficient by their very nature
(i.e., the ones whose stock components track broad market indexes).
However, the bond components will tend to be extremely tax inefficient.
Bonds tend to throw off income which is taxed as normal income (which is taxed
at a relatively high marginal tax rate). |
50/50 Funds
| Vanguard Tax-Managed Balanced Fund Admiral Shares (VTMFX). E/R:
0.12%. This fund's stock portfolio tracks the Russell 1000 index of large-cap stocks while minimizing both
dividend and capital gains distributions. The fund's bond portfolio
invests in intermediate-term municipal bonds. |
This web page contains the current opinions of Eric E. Haas at the time it is
written—and such opinions are subject to change
without notice. This web page is intended to serve two purposes:
| To educate the public; and |
| To provide disclosure of Mr. Haas' opinions to prospective clients.
We believe that prospective clients are well-served by being made aware of
what they are buying—and what they are buying is advice
that is based on these opinions. |
We believe the information provided here to be useful and accurate at the time
it is written.
Information contained herein has been obtained from sources believed to be
reliable, but is not guaranteed.
No investor should invest solely on the basis of information listed here.
Before investing, it is important to consult each prospective investment's
prospectus and consider both its risk/return characteristics and its effect on
your overall portfolio.
This information is not intended to be a
substitute for specific individualized tax, legal, or investment planning
advice. Where specific advice is necessary or appropriate, Altruist
recommends consultation with a qualified tax adviser, CPA, financial planner, or
investment adviser. If you would like to discuss the rationale or support
for any particular idea expressed on this web page, feel free to
contact us. |
