How to Invest With Just One Mutual Fund

Choosing the Best 'All-In-One' Mutual Funds

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You've been told not to put all of your eggs in one basket. This is sound advice. However, there are exceptions to this rule with mutual funds. You may be a beginning investor or someone who has limited investment choices in their 401(k) plan. Or you may want to find a solid core holding to build around for a diversified portfolio.

Before you invest with an "all-in-one" mutual fund, be sure to cover all of the basics of investing.

Key Takeaways

  • Investing in just one fund can be a good learn-the-ropes approach for beginners who are still learning about mutual funds.
  • Index funds can be a good choice because they’re diverse. Also, they often come with low expenses.
  • A balanced or hybrid fund typically maintains an allocation geared toward your risk tolerance.
  • Target-date funds are designed to optimize at a future date that you select. For instance, many people set it for when they plan to retire.

How Do You Use Balanced Funds?

Balanced funds are also known as hybrid funds. These are mutual funds that provide a combination (or balance) of underlying investment assets; these could be stocks, bonds, and cash. This is asset allocation in its simplest of forms.

Balanced funds usually have a stated objective. This may be described as aggressive, moderate, or conservative. For instance, Fidelity Balanced Fund (FBALX) maintains a moderate (medium risk) allocation. It has approximately 70% stocks, 27% bonds, and 1% cash.

One of the best-balanced funds is Vanguard Wellesley Income Fund Investor Shares (VWINX). It normally maintains a conservative allocation of roughly 40% stocks and 60% bonds.

Balanced funds can be used as core holdings of a mutual fund portfolio. Or, they can be used for beginners as a first fund. Either way, balanced funds are diverse and professionally managed. It's a win/win for the one-fund approach.

How Do You Choose Target-Date Funds?

Target-Date Funds are just as they sound: They are funds that invest for a particular date in time. These funds are common in 401(k) plans. And they can be used in the one-fund approach. If you are investing for retirement, you may consider one of Vanguard's target retirement funds.

For instance, let's say you plan to retire in or near the year 2050. You could use Vanguard Target Retirement 2050 Fund (VFIFX). As the target retirement year draws closer, the fund manager will gradually decrease the stock allocation and increase the bond and cash allocation. In other words, it will evolve from aggressive to moderate to conservative over time.

Buyer beware: Target-Date Funds are the ultimate "lazy portfolio." But there are no one-size-fits-all funds. An extremely conservative investor may not be comfortable with a target-date fund allocation if it is too aggressive for their particular risk tolerance. That means you may want to do a little homework before investing. Be sure to check the asset allocation of the target-date fund.

For instance, let's say you want to be more conservative. In that case, you might want to consider a target date that is closer in proximity, such as five or 10 years sooner than your target date.

What if you want to have a more aggressive mix of stocks and bonds with a target-date fund? Then you may want to choose a target date that is farther away, such as five or 10 years later than your target date.

Why Invest in Index Funds?

When considering a one-fund approach, index funds can be a wise choice. That's because of their passive management, broad diversity, and low expenses. Beginners may want to start with an index fund, such as one of the best S&P 500 Index funds, to use in a core and satellite portfolio structure. Or, they may want broader exposure with a total stock market index fund.

Disclaimer: The information on this site is provided for discussion purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Fidelity. “Fidelity Balanced Fund (FBALX)."

  2. Vanguard. “Vanguard Wellesley Income Fund Investor Shares (VWINX)."

  3. Vanguard. “Vanguard Target Retirement 2050 Fund."

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