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Tutorial: Balanced funds

What are balanced funds?

Balanced funds, as indicated by their name, are shares funds in which something is balanced, and the "something" consists in basic classes of assets – money market instruments, bonds and stocks. They are best for medium-term up to long-term investments in the investment horizon of 3 years and more, depending on the fluctuation of the value of their participation certificates. The proportion of individual classes of assets in the portfolio of balanced funds determines the risk profile. Thanks to a combination of several classes of assets, they are best as separate lump sum or regular investments, and pursuant to their risk profile, both conservative and dynamic investors will choose from their selection. Balanced funds can be managed pursuant to various investment strategies. The so-called long-term strategic allocation of assets, i.e. the proportion of individual classes of assets with a small variance, is defined in the Fund Statute of most of balanced funds. The funds follow developments of individual markets relatively truly, which is predominantly advantageous in the growth period. Some balanced funds follow the absolute growth strategy, enabling them to reduce the risk part of the portfolio (stocks) down to the minimum if the development on stock markets is unfavourable. The funds manage risks in the fund portfolio actively, which minimizes possible decreases, but as far as growth is concerned, it lags behind the market slightly.

How do balanced funds work?

Balanced funds endeavour to valuate money as much as possible in the medium-term horizon time up to long-term horizon time by investment in a balanced portfolio composed of individual classes of assets – money market instruments, bonds and stocks. The stock part of the balanced fund portfolio is used for significant valuation of investment above the level achieved with bonds and money market instruments when the stock market grows. The conservative part of the balanced fund portfolio, composed of money market instruments and bonds, is used to mitigate the risk of stock markets when their development is unfavourable and to stabilize the fund yields.

Your advantages

  • High liquidity – fast payout of money without penalties
  • If the recommended investment horizon is kept, it is possible to achieve a higher yield than with bond funds
  • Wide diversification of fund portfolios up to tens of titles, reducing the risk of drop in the investment value
  • Thanks to combining various classes of assets, balanced funds use the effect of mutual dependences (correlations) of the classes (stocks, bonds, commodities, etc.)
  • Wide selection of balanced funds pursuant to their focus and investment strategies
  • Either lump sum or regular investments
  • High transparency

You should know

  • Balanced funds are optimum funds for regular medium-term and long-term investments which reduce the risk of their improper timing
  • Balanced funds are collective investment funds
  • The value of investment in shares funds can go up or down, and return on the amount invested is not guaranteed
  • All details on shares funds and risks connected with investments in the funds, including information on the investment company managing the fund, are provided in the Fund Statute


Purchase conditions

Who can buy?

  • Citizens of the Czech Republic or foreign nationals over the age of 18 years (legal representative in the case of a minor)
  • Legal person, natural person–entrepreneur
  • Other entities established under the laws of the Czech Republic (foundations, movements, political parties)

What documents should be signed by the client

  • Investment adequacy questionnaire
  • Contract for the provision of purchase and sale of securities issued by the subjects of collective investment
  • Contract for the opening and management of investment instrument asset accounts

What is needed for signing the Brokerage Contract

  • Natural person
    Valid identity card (ID card or travel, diplomatic or service passport, residence permit)
  • Legal person
    Proof of legal personality – an extract from the Commercial Register (original or certified copy) not older than 3 months, and proof of entitlement to dispose of share certificates signed by representatives
    Document to verify identity (natural persons – e.g. company executive)
  • Other entities
    Proof of legal personality, which is issued by the appropriate authority that either approves or registers their activities. And here, there are no 3 months... isn't it possibly discrimination?



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