Looking for an 80/20 or 60/40 style fund?

Have you ever seen 80/20 or 60/40 funds and wondered what they mean?

These types of funds are popular because they make investing simpler. Instead of choosing and managing lots of different investments yourself, you invest in a single fund that already contains a mix of assets, such as shares, bonds and cash.

This type of investment is known as a multi asset fund. The mix of investments is managed for you, so you don't have to build and maintain a diversified portfolio yourself.

The main difference between one multi asset fund and another is how much is invested in shares compared with lower-risk assets such as bonds. Funds with more bonds are generally designed for investors who prefer a steadier investment journey. Funds with more shares are designed for investors who are comfortable taking more risk in return for greater long-term growth potential.

Fidelity offers a range of multi asset funds based on the same idea. Each fund contains a different mix of shares, bonds and other investments, giving you a choice of risk levels - from lower-risk portfolios with more bonds through to higher-risk portfolios with a greater focus on shares.

You can access these easily through our Navigator tool, which asks a few simple questions about your investment goals, time horizon and attitude to risk before showing you an investment solution to consider.

Whether you prefer an actively managed portfolio or an index tracker portfolio, Navigator can help you find an investment that matches your needs.

Navigator also includes an Income route for investors looking for regular payouts from their investment. This article focuses on the Growth route because that’s where investors can compare a wider range of multi asset funds across different risk levels.

Using Navigator to find a Growth fund for you

To start, you need to open our Navigator tool, and select ‘growth’ as your investment objective.

You’ll then have two routes to consider:

• Actively managed funds (Navigator describes these as ‘expert-focused growth’)
  Professional investment managers decide what to invest in and adjust the portfolio over time, aiming to manage risk and identify opportunities as markets change. These funds usually cost more than index tracker funds, and there is no guarantee they will perform better. However, some investors value the additional oversight and flexibility that comes with professional fund management.
• Index tracker funds (Navigator describes these as ‘cost-focused growth’)
  Rather than trying to outperform the market, these portfolios aim to track it by investing in a broad range of companies and assets. This can provide a simple, lower-cost way to invest. Because they aim to follow the market rather than beat it, they will usually rise and fall broadly in line with the markets they track.

Whichever route you choose, you'll find the same range of risk levels.

The main differences are how the portfolio is managed - either by professional investment managers or by tracking investment markets - and how much it costs.

It can be tempting to choose one approach over the other based on cost alone. But cost is only one part of the decision. It’s also worth thinking about what you value most - paying more for professional investment managers to actively manage the portfolio and make investment decisions or choosing a lower-cost approach that aims to track markets and broadly move in line with them.

Understanding risk levels

Whether you choose an actively managed or index portfolio, you’ll still need to decide how much risk you’re comfortable taking.

Generally, lower-risk portfolios hold more bonds and fewer shares, while higher-risk portfolios hold more shares and fewer bonds. As you move up the risk spectrum, the potential for long-term growth increases, but so does the chance of larger rises and falls in the value of your investment.

The asset allocation shows how each fund is spread across different types of investments. Shares usually offer greater long-term growth potential but can rise and fall more sharply. Bonds are generally used to add stability, although they can still fall in value. Cash can help with flexibility, while ‘Other’ may include alternative investments used to diversify the portfolio.

Where to find asset allocation

To see how a fund is invested, select ‘View fund details’ from the ‘Your result’ screen and open the fund factsheet. You’ll find the asset allocation under the ‘Portfolio’ tab, where you can see how the fund is spread across shares, bonds, cash and other investments.

Each risk level includes two options: an actively managed fund and an index tracker fund, giving you a choice of how your investments are managed.

A note on the figures: These asset allocation breakdowns are taken from each fund’s factsheet and are correct at publication. You may notice that some small figures appear as negative*. This can happen because of the way certain fund holdings, adjustments or cash positions are reflected on the factsheet, and does not mean the fund has a negative investment in that asset class. The fund’s allocation may also change over time.

1. Low risk

More bonds, fewer shares. Designed for investors who prefer a steadier investment journey.

2. Moderate risk

A step up from lower risk, with more invested in shares and less in bonds. Designed for investors who want some growth potential but still value stability.

3. Medium risk

A mix of shares and bonds. Designed for investors looking for growth potential while still keeping some exposure to lower-risk assets.

4. High risk

More shares, fewer bonds. Designed for investors with a longer time horizon who are comfortable with larger rises and falls in value.

5. Highest risk

Mostly invested in shares, with little exposure to bonds. Designed for investors focused on long-term growth who are comfortable taking the highest level of risk in the range.

Which fund is right for you?

There’s no one size fits all solution - which is why there’s a range. The right choice depends on your goals, how long you plan to invest for and how comfortable you are with risk.

Funds with more bonds and fewer shares usually sit at the lower end of the risk scale. Funds with more shares and fewer bonds usually sit higher up the scale. As the potential for growth increases, so does the chance of larger rises and falls in value.

Navigator can help you explore both routes and compare multi asset funds across different risk levels, so you can choose an option that matches your goals, time horizon and attitude to risk.

• Go to our Navigator tool
   
• Read: What happens to your investment after 1 week, 1 month and 1 year
• Read: Why ‘safe’ isn’t always safer
• Read: Growth versus income investing: the basics

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Navigator is not a personal recommendation in respect of a particular investment. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.