Balanced funds provide investors with the convenience of buying into a single fund rather than holding both equity and bond funds. This category of funds also reduces a portfolio’s volatility, while providing higher returns than pure fixed income investments.

The fund managers also enjoy the flexibility of varying the proportion of equity and fixed income investments in response to market conditions. An upswing may prompt them to hold a relatively higher share of equity in order to maximize gains whereas a downturn sees them turning to fixed income investments to stem losses.

Below we will share with you three top-rated balanced mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of balanced mutual funds, their Zacks Rank, and past performance.

American Funds American Balanced A (ABALX - MF report) seeks long-term growth of capital. The fund invests in both common stocks and bonds that are rated investment grade. It also invests in securities that are issued by the U.S. government and its entities. Moreover, the fund may invest in securities of issuers located in foreign lands. The fund primarily invests in common stocks of companies that are believed to provide dividend income. The American Funds American Balanced A fund has a three-year annualized return of 7.8%.

It has an expense ratio of 0.58% compared with the category average of 0.98%.

Invesco Income Allocation A (ALAAX  - MF report) invest in both U.S. and non-U.S. companies, fixed income instruments and REITs. It allocates 60–70% of its assets in fixed-income instruments and 30–40% in equities. ALAAX seeks current income.The Invesco Income Allocation A fund has a three-year annualized return of 6.4%.

Duy Nguyen has been its portfolio manager since 2014.

Mairs & Power Balanced Investor (MAPOX - MF report) seeks current income and preservation of capital. The fund invests in U.S. common stock as well as fixed income securities including corporate bonds and United States government securities. It may also invest in mortgage-backed securities. The fund may also invest in securities of foreign issuers represented by American Depositary Receipts or are listed on a United States stock exchange. The Mairs & Power Balanced Investor fund has a three-year annualized return of 6.7%.

It has an expense ratio of 0.73% compared with the category average of 0.98%.