In the past, when I thought about balanced mutual funds and ETFs I would think about a Swiss Army knife—a useful tool to have on hand. Today, with the ability to specialize a portfolio to your exact investment criteria and needs, I’m not sure if they’re the right tool for the average retirement investor.
One half, for argument sake, of any balanced fund, is bonds. And it’s my belief a lot of these funds cater to a larger clientele, if you will. Institutions, pensions, foundations and trusts immediately come to mind. Their deep pockets assume a longer investment horizon than the average investor which makes me uncomfortable.
To me, a longer investment horizon for balanced mutual funds and ETFs usually means a longer average maturity. In turn, any increase in interest rates magnifies the losses. Compared to a portfolio constructed of shorter-term maturities you can rest assured my confidence resides with the latter.
And that’s were specialization comes in. Big balanced funds or ETFs are too general for my taste. Because today, like never before, it’s more sensible for retirement investors to construct simple yet sophisticated portfolios. A specialized portfolio for you–not the above crowd—is what you want for your family today.
The big balanced funds and ETFs had their day in the sun. There’s a better way forward and we’re doing it every day for investors. Join us at www.youngsworldmoneyforecast.com.
E.J. Smith