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. Fund managers of such funds 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 5 top rated balanced mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect the fund to outperform its peers in the future. To view the Zacks Rank and past performance of all balanced funds, investors can click here to see the complete list of funds.

New Covenant Balanced Growth (NCBGX - MF report) seeks capital growth with minimized risk. NCBGX allocates its assets among the New Covenant Growth Fund and the New Covenant Income Fund. NCBGX invests 45% to 75% of its assets in the growth fund and the rest of its assets in the income fund. The New Covenant Balanced Growth fund has a three-year annualized return of 10.3%.

NCBGX has an expense ratio of 0.14% as compared to category average of 0.92%.

Fidelity Balanced (FBALX - MF report) invests around 60% of its assets in equity securities and the remainder in a balance of debt securities including bonds and lower-quality debt instruments. FBALX is expected to invest a minimum of one-fourth of its assets in fixed-income senior securities. FBALX invests in securities throughout the globe. The Fidelity Balanced fund has a three-year annualized return of 13.3%.

As of February 2015, the fund held 1172 issues with 3.02% of its assets invested in US Treasury Note 1%.

American Century Balanced Investor (TWBIX - MF report) seeks capital appreciation and current income over the long term. TWBIX invests 60% of its assets in equities and the rest of its assets in fixed-income securities including bonds. Advisors use quantitative management techniques in order to select its investments. TWBIX invests in debt securities of high and medium quality. The American Century Balanced Investor fund has a three-year annualized return of 11.1%.

Brian Howell is one of the fund managers and has managed this fund since 2005.

Pax World Balanced Individual Investor (PAXWX - MF report) is expected to invest 60-75% of its assets in equities and 25-40% of its assets in debt securities. PAXWX uses a sustainable investing approach, which include thorough financial analysis and environmental, social and governance (ESG) analysis to select securities for potential investment. The Pax World Balanced Individual Investor fund has a three-year annualized return of 10.2%.

As of December 2014, the fund held 313 issues with 2.70% of its assets invested in Apple Inc (AAPL).

Vanguard Tax-Managed Balanced Admiral (VTMFX - MF report) seeks tax-efficient investment return with tax free income, long-term capital growth and current income, with a modest amount of tax. VTMFX allocates 50-55% of its assets in municipal instruments and the remainder in common stocks. VTMFX invests in municipal securities of high quality rating having dollar weighted maturity duration of 6 to 12 years. A minimum of 75% of the fund’s municipal securities are expected to be rated among the top three credit-rating categories. The Vanguard Tax-Managed Balanced Admiral fund has a three-year annualized return of 10.4%.

VTMFX has an expense ratio of 0.12% as compared to category average of 0.81%.