Hybrid Funds

A category of mutual fund that is characterized by portfolio that is made up of a mix of stocks and bonds, which can vary proportionally over time or remain fixed. Morningstar separates hybrid funds into domestic hybrid and international hybrid categories. In the hybrid category, balanced funds tend to stick to a relatively fixed allocation of stocks and bonds. Actively managed asset allocation funds tend to have portfolios with a mix of stocks and bonds that responds to market conditions as perceived by the fund manager. Passively managed asset allocation, life-cycle and target-date funds generally have a stock-bond mix that changes over a lifetime, moving progressively from aggressive to more conservative structures.

1. Balanced funds:
Invest in a specific mix of equity securities and bonds with the three-part objective of preserving principal, providing income and achieving long-term growth of both principal and income.

2. Flexible portfolio funds:
Seek a high total return by investing in common stock, bonds and other debt securities and money market securities. Portfolios may hold up to 100% of any one of these types of securities and may easily change, depending on market conditions.

3. Income mixed funds:
Aim at a high level of current income by investing in a variety of income-producing securities, including equities and fixed-income securities. Capital appreciation is not a primary objective.