What Is a Balanced Fund?

By Kristi Waterworth – Updated Sep 9, 2025 at 12:45 PM EST

Key Points

Balanced funds mix stocks and bonds, ideal for low-risk and steady returns.
They are cost-effective due to low expense ratios from minimal rebalancing.
Suitable for retirees and new investors due to their high security and low management need.

If you're looking for an investment pre-designed as a solidly diversified portfolio, a balanced fund might be right for you. A balanced fund is a type of hybrid fund that contains a lot of different investments in a single asset.

Loading paragraph...

A balance with a money bag on one side and stacked boxes of ETFs, stocks, bonds, and other assets on the other side. — Image source: Getty Images.

Loading image...

What is a balanced fund?

A balanced fund is a mutual fund that generally contains both stocks and bonds. It also sometimes contains additional cash reserves, but this should be a very small percentage of the fund, if present at all.

Although the mix can vary, a pretty standard balanced fund contains between 60% and 70% in stocks and 30% to 40% in bonds. Other types of investments are sometimes involved, but the stock/bond combo is the most common.

Who invests in a balanced fund?

Balanced funds are meant to be very hands-off tools invested in very safe assets. So, often, the return isn't as exciting as you might find with something like a basket of growth stocks. However, the moderate returns and low volatility make them ideal for investors seeking practically guaranteed returns and little hassle.

Loading paragraph...

Balanced funds are ideal for retirees looking for consistent cash flow or first-time investors just getting started in investing who can't afford to suffer a loss yet. Because balanced funds are highly diversified, they are considered remarkably secure investments for risk-averse investors.

Loading paragraph...

Advantages of a balanced fund

Although balanced funds will never make you an overnight millionaire, they do have a few advantages that can't be ignored, including:

Low expense ratios. Because balanced funds tend to invest in stable assets, they're rarely rebalanced, meaning there's not much work to compensate. This makes them much cheaper than many types of funds and other assets requiring especially active management.

Loading paragraph...

Low risk. As mentioned above, balanced funds comprise a mix of stocks and bonds chosen from rock-solid investments. This makes them very low-risk, steady producers over time.
Low input. If you're a new investor or someone who would just rather do anything else, a balanced fund allows you to own a lot of little pieces of safe investments you don't have to think about. The fund manager will occasionally rebalance it, but you won't have any involvement in that process.

Disadvantages of a balanced fund

While a balanced fund can be a really good investment for someone not looking for anything too exciting, that's the very thing that makes it a terrible investment for people more interested in taking risks or self-managing.

Related investment topics

Loading paragraph...

ETF vs. Index Fund: What's the Difference and Which Should You Choose?

Your investment style can dictate which kind of fund is best for your portfolio.

How to Calculate Total Assets, Liabilities, and Stockholders' Equity

Assets, liabilities, and stockholders' equity are three features of a balance sheet. Here's how to determine each one.

Safest Stocks to Buy in 2026: Low-Risk Picks for Stability

These companies might be a good bet if you're looking for limited volatility.

What Are Share Repurchases?

Sometimes companies buy back their own stock on the open market. Why would they do this?

Loading hub_pages...

Here are a few drawbacks:

Boring portfolio. There are no two ways to put it: A balanced fund is a boring investment. It's made up of boring stocks and boring bonds -- nothing that might ever get your blood pumping, even if you were base-jumping from the Golden Gate Bridge while checking your portfolio.
Moderate returns. Growth stock and tech investors are often looking for the next explosive stock pick, and friends, this ain't it. As noted, balanced funds typically comprise safe, well-established companies that aren't doing anything but growing at a managed rate. You'll see decent returns but nothing worth bragging about.
Low input. This is also listed as an advantage, but the truth is that it's both, depending on who you are as an investor. Since you have no control over the mix once you've bought into the fund (you do get to choose the initial fund, after all, so you have some say), you also have no control over how funds are reallocated. You also can't use any kind of tax-shielding bucketing since all your stocks and bonds are lumped together into one account.

Loading paragraph...

About the Author

Kristi Waterworth has been a contributing real estate and financial expert at The Motley Fool, covering real estate, investing, and personal finance topics, since 2020. Kristi has been interviewed by various TV media outlets and podcasts for her real estate investing expertise – from residential real estate to digital real estate and everything in between. Kristi’s journalist career spans over 25 years, and she has written about real estate investing, homeownership, and home construction specifically for the last decade. She was also previously a licensed Realtor and general building contractor before the Great Recession and housing market collapse. She holds a bachelor’s degree in American history from Columbia College in Missouri.

TMFMaldivesBlue

@MaldivesBlues

The Motley Fool has a disclosure policy.