Balanced Funds Madness

If you – or someone you care about – is a UK investor and invested a few years back (like many people did) into one of those ‘balanced’ funds, then you should read this.

But first – watch the cartoon above – it has 4 parts.

And be sure to review your investments, regularly, with a good quality adviser – to make sure that they’re still suitable for your needs.

So what’s the big deal.

Well, the funds that used to be called ‘balanced’ were actually permitted to hold up to 85% of their assets in Shares on the Stockmarket.

That’s clearly too risky for someone who genuinely has a moderate (or balanced) ‘capacity’ for risk for a particular investment.

And so, in 2011, the fund management industry abandoned the term ‘balanced’ and replaced it with the rather bland – but more descriptive – term, mixed investment 40-85% shares.

Yes, I know it’s not an inspiring name for a fund – but it does describe “on the tin” the proportion of shares that the fund might hold. So you know what you’re getting into.

Now you might assume that at most times the fund manager would hold a lower proportion in risky assets than this permitted maximum of 85%.

And you might also expect that the fund manager would lower the risk exposure of a ‘mixed’ fund like this, as markets rose to higher valuations (like now for example)

But sadly you’d be wrong to expect

Indeed, there’s every chance that your balanced (or mixed investment 40%-85% shares) fund, will hold something near the maximum 85% in shares at the very worst of times, when markets crash from an all-time high.

To learn why that is – and why it’s unlikely to change . . .
. . . grab yourself a copy of my book ‘Who misleads you about money?’

I explain that and a whole lot more in there – so it’s worth every penny 😉

All the best for now


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