Balanced Fund

A balanced fund is also called an asset allocation fund. It is a type of hybrid mutual fund that combines stocks, bonds and sometimes money market funds in a the same portfolio. Balanced funds are geared toward investors that are looking for a blend of growth and safety and capital appreciation.

Index Fund

An index fund is a type of mutual fund that holds investments that are set to match the same return as a particular market index like the Standard & Poor's 500 Index or Dow Jones Industrial Average. Index funds require minimal to no management, and therefore are less expensive to hold than other types of mutual funds.

Investment Strategy

A balanced index fund seeks to combine the allocation of stocks and bonds that will allow the fund to achieve the same return as a particular market index.

Significance

Typically, 60 percent of a balanced fund's portfolio is in stocks and the other 40 percent is in bonds and money market funds; however, the allocation of the funds can be changed to take advantage of growth opportunities, or to minimize risks.

Warning

The fees of a balanced index fund are not affected by percent changes in the allocation of the funds that comprise the portfolio.

Source:

Investopedia: Mutual Funds: Different Types Of Funds

U.S. Securities and Exchange Commission: Index Funds

Resource:

Fundsavvy.com: Trust Balanced Mutual Funds for Safer Investment