Breaking News

Blend funds are for investors who seek portfolio diversification

Do Index Fund Portfolios Live Up to Expectations? | CFA Institute  Enterprising Investor

What are blend funds?

A blend fund is a mutual fund for equities that has both value and growth stocks. As its name suggests, diversification is abundant across a single portfolio. Hence, it is popular with investors. Blend funds help them get the benefit of value and growth investing. First, value stocks and funds find profit from undervalued investments identified depending on their fundamental characteristics. Next, growth stocks and funds find profit from companies with significant potential for capital growth through earnings and capital gain. If we combine these two that we mentioned in a single portfolio, we have blend funds.

Why blend funds?

A blend fund is like a particular case of a hybrid fund. Portfolio managers usually manage them from a specific investment universe. Blend funds usually get investors’ attention because of their diversification. Hence, they have the liberty to invest in a blend fund which may be large-cap, mid-cap, or small-cap. Investors want a clear picture of how the allocation is determined since one can use different management strategies.

Blend fund combinations

Blend funds go around the whole investment universe in general. So, one can be an index fund that encompasses growth and value stocks in its composition. One blend fund combination can be different from another. For example, one can focus on capital appreciation, income, and growth. It can also be a defined investment allocation. For example, 50% will go to value stocks, 30% to growth stocks, and 20% to high-quality bonds. These are only examples, and the combination can always be changed according to preference.

Identifying blend funds

How does one identify blend funds? It is pretty hard to clearly identify blend funds since the investment strategies in this category vary. So, if you want to invest in blend funds, you need to seek help from investment advisors. You can also do it alone by filtering blend funds using an investment resource like Morningstar. Research providers usually distinguish blend funds as a common category. Have you heard of the Style box investment research? It was solely made to facilitate fund identification in different investment categories like blend funds.

The style box

When differentiating investments by objectives, style box classifications help in that department. For instance, we have a basic style box for stocks that have nine squares. The vertical axis is further divided into three categories. These categories represent the company size which can be either larger, medium, or small. The fund’s market capitalization is the one that will determine this. On the other hand, the horizontal axis is further divided into three categories based on the stocks inside the fund’s stock portfolio, and they are:

  • Value stocks
  • Value or growth blend
  • Growth stocks

If you prefer more diversification for your blend fund, you can filter by stocks in the value or growth blend category.

Today’s highlights

Blend funds are equity mutual funds that invest in growth and value stocks. It aims to make a diversified portfolio that benefits from the growth segment’s capital gains potential and the value segment’s dividend income and stability. There are many blend fund variations. Hence, you should research every possible fund strategy and use the style box for a better and easier categorization of blend funds.