Although investing can certainly be confusing--and even intimidating--for beginners, the good news is that investors today have a variety of different tools at their disposal that allow them to own fairly sophisticated portfolios of securities in one simple package.
One great example is target-date funds, which hold a mix of stocks, bonds, and other investments and which adjust their allocations as the account holder ages. Target-date funds have become an increasingly popular option for retirement savers and a fixture in many employer-sponsored retirement plans. Similarly, college savers can rely on the age-based portfolio offerings that are usually offered in 529 college-savings plans; such options automatically adjust their allocations away from stocks and toward fixed income as the beneficiary approaches college age.
For investors looking for an all-in-one fund option outside of a retirement or college-savings account, allocation funds (also known as balanced funds) offer a mix of stocks and bonds, generally at levels that stay within a given range and that meet a given profile: conservative, moderate, or aggressive.
Below is a list of some great all-in-one investment options suitable for different purposes. All carry Gold Morningstar Analyst Ratings, meaning Morningstar fund analysts consider them among the best in their respective categories. For newbie investors looking for quality investments that are easy to own, these funds are tough to beat. But even seasoned investors looking for a one-stop-shopping option might find them worth a look, as well.
Vanguard Wellesley Income (VWINX)
Conservative investors can live with the portfolio this fund offers. It seeks income with a bit of capital appreciation and a lot of downside protection. The managers park 60%-65% of assets in investment-grade bonds and 35%-40% in dividend-paying stocks offering yields higher than that of the S&P 500 and good prospects for increasing payouts.
Also consider: Manning & Napier Pro-Blend Conservative Term (EXDAX), Vanguard Tax-Managed Balanced (VTMFX), Vanguard LifeStrategy Income (VASIX)
T. Rowe Price Capital Appreciation (PRWCX)
Manager David Giroux typically looks for blue-chip stocks selling at discounts based on their price/earnings or price/book ratios. The fund typically owns 65-80 stocks, and individual positions rarely get allocations much higher than 3%. Giroux typically keeps 55%-65% of the fund's assets in stocks. The fund has at times also held double-digit weightings in traditional bonds (both investment-grade and high-yield debt), leveraged loans, and cash.
Also consider: Dodge & Cox Balanced (DODBX), FPA Crescent (FPACX), Vanguard Wellington (VWELX)
Manning & Napier Pro-Blend Maximum Term (EXHAX)
This fund is geared toward investors with time horizons of more than 15 years. Equity exposure ranges between 70% and 95% of assets depending on the market environment (it was 86% as of September). The management team's macroeconomic and security-specific research determines the fund's asset allocation at any given point.
Also consider: Vanguard LifeStrategy Growth (VASGX)
T. Rowe Price Retirement Series
T. Rowe Price Group (TROW) based the construction of its Retirement funds on extensive in-house studies that suggested investors spend more money in retirement than they anticipate and risk outliving their savings. As a result, the series' asset mix is fairly aggressive. It begins at 90% equity/10% fixed income when investors are the furthest from retirement. The funds adjust their asset allocations at the end of each quarter until they reach the target allocation of 55% equity at retirement. Once this allocation is reached, the quarterly shifts continue for 30 years after retirement until the equity stake comes down to 20%.
Also consider: Vanguard Target Retirement Series
529 College-Savings Plans
Utah Education Savings Plan
This predominately index-based, direct-sold plan continues to be among the leaders in reducing costs. The plan offers four age-based tracks, with options to suit a range of investors' risk tolerances, each composed of low-cost Vanguard index funds. In addition to a standard set of age-based tracks, this is the first plan to offer customizable age-based options, allowing more sophisticated investors to select the underlying funds and preset allocation shifts. But before choosing this or any 529 plan check to see whether your state offers tax breaks on contributions, which could make your in-state plan your best option.
Also consider: Maryland College Investment Plan, T. Rowe Price College Savings Plan (Alaska), The Vanguard 529 College Savings Plan (Nevada)
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