Summary
Balanced funds invest in a blend of stocks and bonds. These funds generally invest 60% of their portfolio in US stocks and the remaining 40% in US bonds. Balanced funds aren’t great choices for taxable accounts. They’re best used in tax-deferred accounts like 401(k)s and traditional IRAs.
Like balanced funds, target-date funds invest in both stocks and bonds. They rebalance back to their target allocation on an ongoing basis. As with balanced funds they aren’t terribly tax-efficient because of ongoing rebalancing and the shift into bonds.
This strategy requires a bit more work on the part of the investor. Most advocate using total market index funds to build three-fund portfolios. The final strategy on our list of the best ways to invest is the most complex. Building a custom-fit portfolio is entirely up to you.
