In a high-flying industry, `balance' counts, too
Boston — In a business that includes ``high flying'' international funds, ``hot'' sector funds, and ``volatile'' gold funds, another category might be called the ``yawning'' balanced funds. To many people, balanced funds are the tired, stodgy old veterans of the mutual fund business. Although they may have started under different names or under different management, some of them are almost as old as the business itself: the George Putnam Fund (organized in 1937), the American Balanced Fund (1932), Bullock Balanced Shares (1932), and the Wellington Fund (1928).
Usually, balanced funds turn in a performance that most people would not consider exciting: They manage to achieve their goals; you just wish they would get there a little faster.
In recent years, though, these old boys have looked a little more sprightly. For the 10 years that ended Dec. 31, they did not quite keep up with the Standard & Poor's 500 index. But then, not many other funds did, either. For the last five years, however, the balanced group pulled ahead of the S&P average.
Among the top balanced funds last year, State Farm's Balanced Fund gained 36.3 percent, the Loomis-Sayles Mutual Fund gained 34.5 percent, Bullock was up 34.3 percent, and Dodge & Cox Balanced Fund picked up 32.5 percent.
For the 10 years ended March 31, the Eaton Vance Investors Fund gained just under 300 percent, and it did manage to beat the S&P average, says Dozier Gardner, president of the fund.
By definition, however, balanced funds would seem to be aiming at mediocrity. Their goal is to minimize investment risk as far as possible without giving up too many opportunities for long-term growth and current income.
They achieve this by investing in a combination of stocks, bonds, and money market instruments. Balanced funds are similar to growth-and-income funds, but the balanced version usually stresses long-term growth over income.
The stock market should probaly get much of the credit for the recent good showing of these funds.
``Balanced funds are doing much better than a number of years ago because stocks and bonds are doing better,'' observes Sheldon Jacobs, editor of the No-Load Fund Investor, a newsletter. ``They will continue to benefit as long as interest rates stay down.''
``Balanced funds are doing better than option-income, option-growth, and equity-income funds,'' notes Michael Lipper, president of Lipper Analytical Services. ``But they're not doing as well as capital appreciation or growth funds.''
``They're still a backwater of the industry,'' Mr. Lipper continues, ``even though they're the ones the mutual fund industry started with.''
Apparently, a few more people are taking a look at the backwater regions.
``Our incoming phone calls on the Wellington Fund have been very high,'' says Brian Mattes, vice-president at the Vanguard Group, which manages Wellington. Its return was up 28.6 percent last year.
These funds are probably best for middle-of-the-road investors, or they can serve as a conservative core of several funds.
``If you have only one fund,'' Mr. Lipper says, ``it's better to have one with a variety of risks.''
If you want the whole investment job done for you in one place, a balanced fund may be for you. Don't expect to see it at the top of any list of this year's winners. But then, over the long term, it probably won't be on a loser's list, either.