We all know we're supposed to eat a balanced diet that includes proteins, fruits, vegetables and starches. And to keep ourselves in top-notch condition, we should throw in a little exercise. Well, what's good for the body is also good for your investment portfolio.
Investing across the board--in stocks as well as bonds--is one way to create a healthy portfolio of securities designed to weather many of Wall Street's storms. When inflation and interest rates are low and stocks are running hot, it's great to be invested in equities. When interest rates are high, it makes sense to be a fixed-income investor. To get the best of both worlds in the mutual fund arena, consider a balanced fund.
The Phoenix-Engemann Balanced Return Fund has been around since the late 1980s. For the first few months of its existence, the fund was called the Fortress Fund. Then the name was changed to the Pasadena Balanced Return Fund. When the Pasadena funds were sold, the name was changed to its current one. But don't let all those name changes scare you into thinking the fund hasn't been well-managed. Quite the contrary. Since its inception, the fund has been under the consistent care of Jim Mair, who remains a portfolio manager. And looking back on its performance, the Phoenix-Engemann Balanced Return Fund has one of the best long-term track records around. In 1998, for example, the fund's performance--29.12 percent--even beat that of the S&P 500, an impressive feat for a fund that invests in both stocks and bonds. For the past three years ending December 31, 1998, the fund's average annual return has been 21.86 percent. Its average annual total return since its inception is 15.95 percent.
Why does the fund perform so well? One reason might be that its three portfolio managers prefer creme de la creme securities. On the equity side, this means investing in the biggest and best corporations around, such as Intel, Home Depot, Microsoft, Dayton Hudson and McDonald's. On the debt side, it's U.S. Treasury securities only. Another reason might be the way the fund divides its assets; typically it invests between 25 and 35 percent of its assets in Treasury securities, with the balance in equities. It could've been a 50/50 split, but we believe equities will provide a much higher rate of return over the long term, so we have a bias toward them, says Mair.
Mair calls the fund "sort of the chicken's way to participate in the equities market"--the fund appeals to people who want to get into the stock market, but are a little afraid of doing so. A balanced fund, with its fixed-income component, provides them with a more conservative, and typically less volatile, investment.
While balanced funds aren't likely to be the hottest performers, people who invest in them aren't usually up nights worrying about what's happening in the market. They know they've got both sides covered.
Dian Vujovich is a nationally syndicated mutual fund columnist and author of 101 Mutual Fund FAQs (Chandler House Press). For free educational mutual fund information, visit her Web site, http://www.diansfundfreebies.com
At a Glance
Fund name: Phoenix-Engemann Balanced Return Fund (PABRX)
Managed by: Roger Engemann & Associates
Portfolio managers: Roger Engemann, Jim Mair and John Tilson
Top holdings: Intel, Worldcom, Home Depot, Merck and Pfizer
Total assets: $113.7 million
Average annual return: 15.95% since its inception in 1987
Maximum Load: 4.75% on Class A shares
Total expense ratio: 1.63% including a 12b-1 fee of 0.25%
Management fee: 0.76%
Minimum initial investment: $500
Phone: (800) 243-4361
Figures are as of April 30, 1999.