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Chapter 11. The Name Game—Understanding ... > Getting to Know the Major Investment... - Pg. 111

The Name Game--Understanding the Different Types of Mutual Funds 111 A balanced fund tries to balance the objectives of income and growth. The managers of these funds attempt to accomplish this balance by investing in a relatively fixed combination of bonds and stocks. Most balanced funds hold 40­60 percent bonds, 40­60 percent stocks, and the remainder in cash in their portfolios. A typical neutral position for a balanced fund is 50 percent stocks, 45 percent bonds, and 5 percent cash. If the fund has more than 5 percent cash equivalents, it's generally waiting for a buying opportunity. The important thing to remember about balanced funds is that their mix of stocks and bonds stays relatively fixed over time. An asset allocation fund is similar to a balanced fund because it seeks to maximize growth and income for its shareholders. The difference is in how the fund goes about achieving its goal. The asset allocation fund manager is trying to figure out the "optimal" percentage of money to put in stocks, bonds, or cash. While the balanced manager keeps the percentages invested in stocks and bonds pretty much fixed, the asset allocation manager will move in and out of stocks, bonds, and cash based upon market conditions. Terms to Know The term asset allocation confuses some people. Most of us can consider the terms investment,asset,capi- tal , and money to be the same. All asset allocation means is how much of your money should be in cash, how