Funds That Keep It Simple

Over the past decade, the fund has returned an annualized 9%, which trumps the gain of the typical balanced fund by an average of five percentage points per year. Carlson and Fusting search for out-of-favor stocks of companies with little debt and predictable revenues that benefit from a catalyst -- such as new management, a new product or takeover activity -- that will make the shares go up. "We try to focus on stocks that are not dependent on a favorable stock market or a robust bond market," says Carlson, who has managed the fund since 1987.

Go global. Balanced funds tend to limit their foreign-stock holdings to less than 20% of their portfolio. If you want more exposure to overseas markets, consider a global balanced fund, which invests in stocks and bonds from around the world. Note, however, that many of the best global balanced funds carry either sales charges or high fees.

Fidelity Global Balanced ( FGBLX) is a solid no-load choice. Managers Derek Young and Ruben Calderon set the overall allocation to stocks and bonds while a group of managers, culled from large regional funds at Fidelity, picks the underlying investments using a variety of strategies. Young and Calderon took the helm in January 2006. From then to July 1, the fund has returned an annualized 10%. That's two percentage points per year better than the gains from the typical global balanced fund over that period. The fund has 28% of its portfolio in foreign stocks.

Pax World Balanced ( PAXWX) gives you plenty of international flavor if you don't mind the social screens. The fund has 17% of its assets in foreign stocks. Manager Chris Brown, who has run the fund since April 1998, selects from a universe of more than 600 stocks of companies that have been vetted for their environmental track records and labor practices. Brown looks for growing companies with solid balance sheets, a lot of cash on hand and reasonably priced shares. Over the past decade, the fund has returned an annualized 5%, which beats the typical gain of balanced funds by an average of one percentage point per year. Pax World's low minimum of $250 makes it a good starter fund.

Our Picks for Your Portfolio

Each of these balanced funds offers a complete portfolio.

Fund name: Dodge & Cox Balanced Symbol: DODBX Investment mix:69% stocks, 31% bonds and cash Minimum investment:$2,500 Top three stock holdings: Comcast ( CMCSA), Hewlett-Packard ( HPQ) and Wachovia ( WB)

Fund name: Fidelity Global Balanced Symbol: FGBLX Investment mix:55% stocks, 36% bonds and cash, 9% other Minimum investment:$2,500 Top three stock holdings: Norfolk Southern ( NSC), Southwestern Energy ( SWN) and Visa ( V)

Fund name: Greenspring Symbol: GRSPX Investment mix:62% stocks, 38% bonds and cash Minimum investment:$2,000 Top three stock holdings: FTI Consulting ( FCN), Suncor Energy ( SU) and Emcor Group ( EME)

Fund name: Pax World Balanced Symbol: PAXWX Investment mix:71% stocks, 29% bonds and cash Minimum investment:$250 Top three stock holdings: CVS Caremark ( CVS), America Mobile ADR ( AMX) and Cisco ( CSCO)

Fund name: Vanguard Wellington Symbol: VWELX Investment mix:65% stocks, 35% bonds and cash Minimum investment:$10,000 Top three stock holdings: AT&T ( T), General Electric ( GE) and Chevron ( CVX)