PruFid Financial Advisors LLC

Balanced Funds

Balanced funds are funds which have strategic allocations to both bonds and stocks. Balanced funds can be quite useful as a temporary place to "park" assets that are either being accumulated for more elaborate deployment, or assets that are being temporarily stored for near-term spending. Balanced funds may also be appropriate for those who value simplicity above all else. There are many alternatives. Which is best?

The funds are grouped by stock/bond allocation, and within stock/bond allocation, in rough order of our overall preference.

Preferences are listed separately for use in retirement accounts and for taxable accounts.

For a listing of our preferences in other asset classes, see here.

Retirement Accounts (i.e., tax-deferred or tax-exempt accounts)

100% Stock Funds

100% stock funds aren't technically "balanced" because they include no bonds. However, for individuals seeking a complete equity investing program in a single fund, these funds fit the bill. These funds can be combined with bond funds in whatever ratio you desire to form a simple, highly diversified, two-fund, nearly complete investing program.

• DFA Global Equity Portfolio (DGEIX). E/R: 0.25%. This fund is a "fund of funds" which invests in several other DFA funds. It has a strong "value" and "small" orientation. It includes foreign and emerging market stocks, as well as REITs.
• Vanguard Total World Stock Index Fund Admiral Shares (VTWAX). E/R: 0.09%. This fund tracks the FTSE All-World Index. This fund is rated higher than the below funds due to its low cost.
• Avantis All Equity Markets ETF (AVGE). E/R: 0.23%. This ETF is a "fund of funds" which invests in several other Avantis funds. It has a "value" and "small" orientation. It includes foreign and emerging market stocks, as well as REITs.
• DFA World Equity ETF (DFAW). E/R: 0.25%. This ETF is a "fund of funds" which invests in several other DFA funds. It has a "value" and "small" orientation. It includes foreign and emerging market stocks, as well as REITs.
• iShares MSCI ACWI Index Fund (ACWI). E/R: 0.32%. This ETF tracks the MSCI All-Country World Index.

90/10 Funds

• Vanguard Target Retirement 2070 Fund (VSVNX). E/R: 0.08%. This fund is a "fund of funds" which invests in several other Vanguard index funds, including foreign stocks. It gradually becomes increasingly conservative as the year 2070 approaches.
• Vanguard Target Retirement 2065 Fund (VLXVX). E/R: 0.08%. This fund is a "fund of funds" which invests in several other Vanguard index funds, including foreign stocks. It gradually becomes increasingly conservative as the year 2065 approaches.
• Vanguard Target Retirement 2060 Fund (VTTSX). E/R: 0.08%. This fund is a "fund of funds" which invests in several other Vanguard index funds, including foreign stocks. It gradually becomes increasingly conservative as the year 2060 approaches.
• Vanguard Target Retirement 2055 Fund (VFFVX). E/R: 0.08%. This fund is a "fund of funds" which invests in several other Vanguard index funds, including foreign stocks. It gradually becomes increasingly conservative as the year 2055 approaches.
• Vanguard Target Retirement 2050 Fund (VFIFX). E/R: 0.08%. This fund is a "fund of funds" which invests in several other Vanguard index funds, including foreign stocks. It gradually becomes increasingly conservative as the year 2050 approaches.

85/15 Funds

• Vanguard Target Retirement 2045 Fund (VTIVX). E/R: 0.08%. This fund is a "fund of funds" which invests in several other Vanguard index funds, including foreign stocks. It gradually becomes increasingly conservative as the year 2045 approaches.
• Fidelity Multi-Asset Index Fund (FFNOX). E/R: 0.11%. This fund is a "fund of funds" which invests in several other Fidelity index funds in fixed allocations.

80/20 Funds

• Vanguard LifeStrategy Growth Fund (VASGX). E/R: 0.14%. This fund is a "fund of funds" which invests in several other Vanguard index funds in fixed allocations.
• iShares Core Aggressive Allocation ETF (AOA). E/R: 0.15%. This fund is a "fund of funds" which invests in several other iShares index funds in fixed allocations.

75/25 Funds

• Vanguard Target Retirement 2040 Fund (VFORX). E/R: 0.08%. This fund is a "fund of funds" which invests in several other Vanguard index funds, including foreign stocks. It gradually becomes increasingly conservative as the year 2040 approaches.

70/30 Funds

• Vanguard Target Retirement 2035 Fund (VTTHX). E/R: 0.08%. This fund is a "fund of funds" which invests in several other Vanguard index funds, including foreign stocks. It gradually becomes increasingly conservative as the year 2035 approaches.

65/35 Funds

• Avantis Moderate Allocation ETF (AVMA). E/R: 0.21%. This ETF is a "fund of funds" which invests in several other Avantis funds. It has a "value" and "small" orientation. It includes foreign and emerging market stocks, as well as REITs.

60/40 Funds

• DFA Global Allocation 60/40 Portfolio (DGSIX). E/R: 0.24%. This fund is a "fund of funds" which invests in several other DFA funds. The equity portion is similar to that of the DFA Global Equity Fund (DGEIX) above. The bond portion is split between several DFA bond funds. It is rated higher than the below funds due to its stock portfolio's extraordinary diversification and strong "value" and "small" tilt, as well as its bond portfolio's short duration.
• Vanguard LifeStrategy Moderate Growth Fund (VSMGX). E/R: 0.13%. This fund is a "fund of funds" which invests in several other Vanguard index funds in fixed allocations.
• Vanguard Target Retirement 2030 Fund (VTHRX). E/R: 0.08%. This fund is a "fund of funds" which invests in several other Vanguard index funds, including foreign stocks. It gradually becomes increasingly conservative as the year 2030 approaches.
• iShares Core Growth Allocation ETF (AOR). E/R: 0.15%. This fund is a "fund of funds" which invests in several other iShares index funds in fixed allocations.
• Vanguard Balanced Index Fund Admiral Shares (VBIAX). E/R: 0.07%. 60% of this fund's assets are invested in a portfolio indexed to the MSCI US Broad Market Index of US stocks and 40% of this fund's assets are invested in a portfolio indexed to the Barclays Aggregate Bond Index. This fund is rated below the above funds primarily because it is less diversified (i.e., with no foreign holdings).

50/50 Funds

• Vanguard Target Retirement 2025 Fund (VTTVX). E/R: 0.08%. This fund is a "fund of funds" which invests in several other Vanguard index funds, including foreign stocks. It gradually becomes increasingly conservative as the year 2025 approaches.

40/60 Funds

• Vanguard LifeStrategy Conservative Growth Fund (VSCGX). E/R: 0.12%. This fund is a "fund of funds" which invests in several other Vanguard index funds in fixed allocations.
• iShares Core Moderate Allocation ETF (AOM). E/R: 0.15%. This fund is a "fund of funds" which invests in several other iShares index funds in fixed allocations.

30/70 Funds

• Vanguard Target Retirement Income Fund (VTINX). E/R: 0.08%. This fund is a "fund of funds" which invests in several other Vanguard index funds.
• iShares Core Conservative Allocation ETF (AOK). E/R: 0.15%. This fund is a "fund of funds" which invests in several other iShares index funds in fixed allocations.

25/75 Funds

• DFA Global Allocation 25/75 Portfolio (DGTSX). E/R: 0.25%. This fund is a "fund of funds" which invests in several other DFA funds. The equity portion is similar to that of the DFA Global Equity Fund (DGEIX) above. The bond portion is split between several DFA bond funds. We like it because of its stock portfolio's extraordinary diversification and strong "value" and "small" tilt, as well as its bond portfolio's short duration.

20/80 Funds

• Vanguard LifeStrategy Income Fund (VASIX). E/R: 0.11%. This fund is a "fund of funds" which invests in several other Vanguard index funds in fixed allocations.

• DFA Retirement Income Fund (TDIFX). E/R: 0.18%. This fund is a "fund of funds" which invests in several other DFA funds in fixed allocations.

Taxable Accounts

To our knowledge, there is only one good tax-managed balanced fund available. If you feel you desire a "balanced" fund in a taxable account, here are some considerations to think about:

• It is possible to get virtually any stock/bond allocation if you combine a global stock fund (e.g., AVGE, DFAW, or VTWAX) with a tax-exempt short-term bond fund. Such a portfolio would be quite well diversified, simple, and tax-efficient.
• If you use one of the non-tax-managed balanced funds in a taxable account, the fund will not be very tax-efficient. Most of the balanced funds' stock components are quite (capital gains) tax-efficient by their very nature (i.e., the ones whose stock components track broad market indexes). However, the bond components will tend to be extremely tax inefficient. Bonds tend to throw off income which is taxed as normal income (which is taxed at a relatively high marginal tax rate).

50/50 Funds

• Vanguard Tax-Managed Balanced Fund Admiral Shares (VTMFX). E/R: 0.12%. This fund's stock portfolio tracks the Russell 1000 index of large-cap stocks while minimizing both dividend and (short-term) capital gains distributions. The fund's bond portfolio invests in intermediate-term municipal bonds.

This web page contains the current opinions of Eric E. Haas at the time it is written—and such opinions are subject to change without notice. This web page is intended to serve two purposes:

• To educate the public; and
• To provide disclosure of Mr. Haas' opinions to prospective clients. We believe that prospective clients are well-served by being made aware of what they are buying—and what they are buying is advice that is based on these opinions.

We believe the information provided here to be useful and accurate at the time it is written. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed.

No investor should invest solely on the basis of information listed here. Before investing, it is important to consult each prospective investment's prospectus and consider both its risk/return characteristics and its effect on your overall portfolio.

This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, PruFid recommends consultation with a qualified tax adviser, CPA, financial planner, or investment adviser. If you would like to discuss the rationale or support for any particular idea expressed on this web page, feel free to contact us.