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Balanced Funds

 

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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.

bulletDFA 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.
 
bulletVanguard 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.
 
bulletAvantis 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.
 
bulletiShares 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.
 
bulletDFA 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.
 
bulletDFA 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.
 
bulletDFA 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.
 
bulletFidelity 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.
 
bulletVanguard 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.
 
bulletVanguard 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.
 
bulletiShares 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.
 
bulletSchwab 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.
 
bulletSPDR 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.
 
bulletVanguard 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).
 
bulletiShares 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.
 
bulletiShares 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.
 
bulletDimensional U.S. Equity ETF (DFUS).  E/R: 0.09%.  This fund tracks the entire US stock market.

90/10 Funds

bulletVanguard 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.
 
bulletVanguard 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.
 
bulletVanguard 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.
 
bulletVanguard 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

bulletVanguard 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.
 
bulletFidelity 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

bulletVanguard 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.
 
bulletVanguard 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.
 
bulletiShares 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

bulletVanguard 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

bulletVanguard 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

bulletAvantis 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

bulletDFA 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.
 
bulletVanguard 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.
 
bulletVanguard 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.
 
bulletiShares 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.
 
bulletVanguard 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

bulletVanguard 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.
 
bulletFidelity 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

bulletVanguard 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.
 
bulletiShares 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

bulletVanguard Target Retirement Income Fund (VTINX).  E/R: 0.08%.  This fund is a "fund of funds" which invests in several other Vanguard index funds.
 
bulletiShares 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

bulletDFA 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

bulletVanguard 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.

Taxable Accounts

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:

bulletIt 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.
 
bulletIf 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.
 
bulletif 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

bulletVanguard 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.

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This web page contains the current opinions of Eric E. Haas at the time it is writtenand such opinions are subject to change without notice.  This web page is intended to serve two purposes:

bulletTo educate the public; and
bulletTo 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 buyingand 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.

 

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