I own Dodge & Cox Balanced, T. Rowe Price Capital Appreciation and Vanguard Star mutual funds, as well as five pure stock funds and one bond fund. When I calculate the percentage of my investments in stocks and bonds, should I include the portion of bonds in my balanced funds as part of my total allocation?
Absolutely. Think of it this way: If you have $1,000 in a pure stock fund and $1,000 in a fund that's 60% in stocks and 40% in bonds, you effectively have $1,600 in stocks and $400, or 20% of your portfolio, in bonds.
The quick way to calculate your bond allocation: For each fund, multiply the percentage that the fund represents in your portfolio by the percentage of the fund that's invested in bonds. Then add those totals together.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
However, holding balanced funds mucks up the math. Another problem with balanced funds is that many investors treat their bond holdings as an afterthought. A fund may hold short-term taxable bonds, but if you're in a high tax bracket and want a high yield, you might be better off investing in long-term municipal bonds.
Balanced funds are a fine solution for investors with modest resources who can afford to buy only one or two funds. But if you have the wherewithal to buy five funds or more, you're better off assembling a balanced portfolio with great stock funds and the best, most appropriate bond funds.
For help creating a mutual-fund portfolio that matches your investing goals, see Build Your Perfect Portfolio. Also see our Suggested Portfolios, which combine the Kiplinger 25 mutual funds into portfolios based on various investing time frames. And visit the Kiplinger Mutual Fund Center for fund rankings and more information about mutual funds.
-
Don’t Miss Apple and Walmart Back-to-School Tax-Free Holiday Savings this SummerSales Tax Select states host sales tax holidays during the summer. Here’s what you can purchase.
-
The Rule of Retirement InversionThe rule of retirement inversion says that to have a great retirement, you must ask yourself what would ruin a great retirement — and then plan to avoid it.
-
Money for Your Kids? Three Ways Trump's ‘Big Beautiful Bill’ Impacts Your Child's FinancesTax Tips The Trump tax bill could help your child with future education and homebuying costs. Here’s how.
-
Key 2025 Tax Changes for Parents in Trump's MegabillTax Changes Are you a parent? The so-called ‘One Big Beautiful Bill’ (OBBB) impacts several key tax incentives that can affect your family this year and beyond.
-
What Does Medicare Not Cover? Eight Things You Should KnowHealthy Living on a Budget Medicare Part A and Part B leave gaps in your healthcare coverage. But Medicare Advantage has problems, too.
-
Estate Planning Checklist: 13 Smart Movesretirement Follow this estate planning checklist for you (and your heirs) to hold on to more of your hard-earned money.
-
Smart Ways to Invest Your Money This YearFollowing a red-hot run for the equities market, folks are looking for smart ways to invest this year. Stocks, bonds and CDs all have something to offer in 2024.
-
Best 401(k) Investments: Where to InvestKnowing where to find the best 401(k) investments to put your money can be difficult. Here, we rank 10 of the largest retirement funds.
-
7 Best Stocks to Gift Your GrandchildrenThe best stocks to give your grandchildren have certain qualities in common.
-
How to Find the Best 401(k) InvestmentsMany folks are likely wondering how to find the best 401(k) investments after signing up for their company's retirement plan. Here's where to get started.
