Last year’s calendar was the year of the liberation of investment funds and almost every category have obtained significant performance in any case always higher than inflation. It’s hard to believe that this cavalcade of fixed income funds can continue at this pace so from now on we need to invest wisely.
In addition to the so called coupon funds we’ve talked about recently, one of the categories of funds that is more interesting is the balanced funds, so called because they invest in various asset classes such as bonds, equities and sometimes even in commodities. In the traditional balanced portfolios dominates the equity component, according to current standards it can go from 10% to 90% of the portfolio, which involves the risk of loss in periods of inflation and recession.
The last frontier of balanced funds consist of balanced risk asset allocation funds that are really interesting as they aim to combine good returns with a rigorous risk control. All features which make them suitable to become the only tool to manage virtually all the savings of a family which does not want to have too many open positions.
How to assess the funds in this category? Keep in mind the three year performance and volatility. The highest efficiency is achieved by the management based on the so called risk parity strategy or weigh every effort so that each asset class contributes to the same percentage of portfolio risk and is steady in all possible scenarios. Moreover, it is known that the concentration of risk in the world finance is the worst of evils for this diversification is the watchword.