Balanced funds generally have limits on how much of their assets can be in stocks at any given time. An asset allocation fund, on the other hand, seeks maximum levels of current income and capital growth. Therefore, they could carry more risk than a balanced fund. In the last five years, as many actively managed funds have lagged their benchmarks both because of higher fees and comparatively weak management, index funds have gained in popularity. Recently these funds have attracted much attention, and therefore, asset inflows.
Index funds can track small-cap stocks, bonds, or specific industry sectors.
Expect more fund companies to offer index funds in reaction to years of solid performance, favorable press and investor demand. In 1992, Charles Schwab pioneered the concept of the fund supermarket and opened up an entire new world to investors. Prior to the advent of fund supermarkets, investors either had to hire a full service brokerage account or open an account with each mutual fund family. The brokerages listed above offer mutual fund choices that number in the hundreds or thousands. Many are no-load funds and some can be purchased without a transaction fee.