Balancing Act Gets Tougher for Funds

The long shadow of higher interest rates hanging over the markets may be worrying investors, but imagine the challenge faced by managers of balanced mutual funds, which invest in both equities and bonds with a low-risk bias.

A look at the approach of balanced fund managers shows a variety of strategies to rising interest rates, and indicates there's probably no single right answer for how to be ready when the Federal Reserve Board finally acts.

The recent sharp decline in bond prices has prompted some managers to move to stocks and cash, while others are increasing fixed-income allocations to hunt for opportunities. Other managers -- by choice or by design -- say they'll stay put and stick to long-term investment plans regardless of interest rate moves. ...