What Is a Balanced Index Fund?

Investors looking for a simple vehicle to provide both growth and income can find this in a balanced index fund. These all-in-one mutual funds place investor's money in an index which mimics the broad U.S. stock market and a portion in an index which tracks the entire U.S. bond market. Depending on the mutual fund company, these funds also come with minimal management fees.

History

One of the first balanced index funds was offered by Vanguard, the mutual fund company which pioneered the concept of index investing. Vanguard's Balanced Index fund was founded in 1992.

Significance

This type of fund gives investors looking to balance the growth of stocks with the income of bonds a single, simple option to place their money.

Function

Balanced index funds typically split their holdings with 50 to 60 percent of monies placed in investment vehicles which mirror the S&P 500 or Wilshire 5000 indexes and the remainder in bonds which mimic the Lehman Brothers Bond Index.

Features

Most balanced index funds offer reasonable initial minimum investments of around $3,000 and very low expenses, usually around .20 to .30 percent.

Benefits

These funds are especially good for retirement accounts such as 401(k)s and IRAs.

Resources

• Vanguard Mutual Funds