How balanced funds can help you cope with market swings

Market volatility often triggers strong reactions—fear when prices fall and greed when markets rally. Many investors panic-sell during downturns or chase returns during rallies, undermining their long-term goals.

Giving in to emotions, however, often leads to deeper losses or missed opportunities. One way to counter these impulses is to invest in balanced funds.

Balanced funds combine fixed income and equities in a single portfolio, providing built-in diversification that cushions the impact of market swings. With both growth and stability working together, investors are less tempted to make hasty moves.

Aiming high with a safety net

A key feature of balanced funds is the inclusion of a fixed-income component, which acts as a “safety net.” While equities aim to deliver higher returns over time, bonds typically generate steady income and tend to hold value better during market downturns.

This stabilizing effect helps smooth overall performance, making it easier for investors to stay invested through volatile periods.

Importantly, “balanced” does not necessarily mean a 50/50 split between stocks and bonds all the time. Asset allocations can range from 60/40 to 70/30 or other mixes, depending on the fund’s mandate, market outlook, and the fund manager’s strategy. This flexibility allows fund managers to adjust exposures as market and economic conditions evolve.

Making diversification simpler

Balanced funds offer several advantages. They provide instant diversification by combining fixed-income instruments and equities in one professionally managed portfolio, giving investors exposure to multiple sources of return without having to select and monitor individual securities.

Fund managers actively adjust allocations based on market conditions and economic outlook, helping to capture opportunities and manage risks across changing cycles. This disciplined approach can smooth returns over time, making balanced funds suitable as a core holding for investors seeking both growth and stability.

However, investors should note that balanced funds may lag during strong equity rallies due to their bond component, and rising interest rates can create short-term pressure on fixed-income prices.

Being comfortable with trade-offs

For clients considering a balanced fund, financial advisors can frame risk as the trade-off between potential return and the level of stability an investor can comfortably sustain. The objective is not to eliminate risk but to align it with the client’s time horizon and capacity to stay invested through market cycles. By moderating volatility, balanced funds help reduce the temptation to make reactive decisions.

Beyond volatility management, balanced funds deliver other benefits. They can serve as a core holding in a diversified wealth strategy, particularly for high-net-worth individuals seeking steady growth with built-in risk control.

Professional fund management and active rebalancing relieve investors from the daily pressures of monitoring markets, allowing them to focus on long-term objectives such as retirement, education funding, or estate planning.

Simple can be powerful

A common misconception is that balanced funds are too “simple” for sophisticated investors. In reality, the fund’s disciplined approach to asset allocation is what makes them powerful. Rather than chasing short-term trends, balanced funds provide a structured way to participate in growth while protecting against downside risks.

For investors seeking a smoother ride through market ups and downs, balanced funds offer a compelling combination of growth potential and downside protection.

For those who want to know more about balanced funds, we suggest consulting your relationship manager or investment specialist. You may also explore the Metro Balanced Fund as well.

ELAINE BUDAY-PAISO heads the Pooled Funds Management Department of the Trust Banking Group of Metrobank. She has been a part of the Trust and Investments Division of different institutions for more than 15 years as an investment or portfolio manager and trade execution officer. Outside of the office, she enjoys quality time with her husband and their energetic 5-year-old son.

(Metrobank Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.)