Mixed funds best reflect the original mutual fund approach. Mixed funds invest in (almost) everything. Stocks, bonds and money market papers form the basis of the selection universe, some providers even mix real estate into the portfolio. Investors who are looking for broad risk diversification but do not want to have 25 different stocks in their securities account are the target group for this type of open-ended investment fund. This type of fund was first launched in Germany in the early 1970s.
- While a fund can have very high equity ratios in accordance with investment principles, in another fund it is the bonds that are in the foreground.
- Mixed funds actually offer a type of asset management due to the broad diversification of the underlying assets.
- Target funds represent a special variant in the mixed funds class. Open-ended investment funds do not normally have a fixed term.
Market timing – the key to success
According to digopaul, the composition of the individual mixed funds available on the market differ significantly. While a fund can have very high equity ratios in accordance with investment principles, in another fund it is the bonds that are in the foreground. The selection depends only on the investor’s personal risk affinity. The advantage of a mixed fund is that the fund management can change the investment focus at any time, so that the investor is always optimally positioned according to the respective market situation. Sinking interest on the capital market often goes hand in hand with rising share prices. The right time to get out of bonds and get into finding stocks , the market timing, is the task of fund management. The opposite is of course the same when it comes to safeguarding the profits from stocks when the stock market is falling and investing the investors’ money back in less volatile bonds.
Asset management for small investors
Mixed funds actually offer a type of asset management due to the broad diversification of the underlying assets. These are placed in different risk classes, which are defined by the equity component. Funds of funds put the investors’ money in other funds and in this way put together their own fund portfolio. These funds of funds are classified according to risk aspects using suffixes such as “Classic”, “Balanced” or “Dynamic”. However, fund of funds as a mixed fund entail a cost risk for investors in contrast to a pure mixed fund. Both the fund management of the fund of funds and the management of the target funds charge fees. In case of doubt, there may be an additional burden compared to a single mixed fund despite discounted management fees.
Target funds – funds with a fixed term
Target funds represent a special variant in the mixed funds class. Open-ended investment funds do not normally have a fixed term. Target funds, on the other hand, are repaid at a predetermined point in time. These mixed funds initially invest in high-potential, albeit very volatile, underlyings. Over time, the fund management begins to shift these volatile papers, even if there are further profit prospects, into more conservative stocks, ultimately into money market papers. This secures the profits from the initial phase. Target funds do not, however, offer a capital guarantee. If the fund management fails, investors may get back less than they paid in. Classic mixed funds offer the advantage that they can be held as long as
The fund selection
Of course it plays return of a mixed fund in the selection of at least the same role as the risk orientation. In a five-year comparison (as of June 2014) there are certainly papers with a performance of over 50 percent, some exceptions even offer a performance of over 100 percent. However, since the capital markets during this observation period were characterized by rising stock exchanges and a simultaneous phase of low interest rates, this is not surprising. Incidentally, the return can still be increased. At the discharge of the withholding tax , investors cannot change anything, but they can change the selection of the custodian bank. Anyone who chooses a bank that on the one hand waives the custody account management fee and on the other hand sells the funds with a discounted front-end load automatically increases their net return.