Hybrid or asset allocation funds seek a high total return by investing in a mix of equities, fixed-income securities and money market instruments. Unlike flexible portfolio funds, these funds require strict and precise distribution of asset classes.
Hybrid (balanced) funds may be appropriate for investors who:
• Seek both current income and potential long-term capital appreciation
• Are willing to tolerate moderate risk compared to the value of their principal
• Seek lower share-price volatility than is typically shown by stock funds
• Seek higher growth potential than is typically provided by only bond funds
• Value the convenience of investing in both stocks and bonds within a single fund.
Main Types of Hybrid Funds
Balanced funds: Invest in a specific mix of equity securities and bonds with the three-part objective of preserving principal, providing income and achieving long-term growth of both principal and income.
Flexible portfolio funds: Seek a high total return by investing in common stock, bonds and other debt securities and money market securities. Portfolios may hold up to 100% of any one of these types of securities and may easily change, depending on market conditions.
Income mixed funds: Aim at a high level of current income by investing in a variety of income-producing securities, including equities and fixed-income securities. Capital appreciation is not a primary objective.