The problem with traveling down the middle of the road is that you're being passed on all sides and in constant danger of being run over...

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The problem with traveling down the middle of the road is that you’re being passed on all sides and in constant danger of being run over.

And yet when it comes to mutual funds, investors are flocking to the center of the pack, making dull, boring moderation seem like an absolute fad.

The problem with this trend is not just that there can be a financial price to pay; it’s that in the search for a simpler existence some investors are messing up their portfolio.

Over the past 18 months, according to Lipper, investors have put $119 billion into “mixed equity” funds. That category includes balanced funds, asset-allocation funds, life-cycle funds and issues that follow a strategy that puts stocks and bonds under one roof.

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By comparison, some $227 billion went into equity funds — issues that focus entirely on stocks — over the same time.

But equity funds have $4 trillion in assets, while the mixed funds — even after the run-up — have about $620 billion overall. That means the cash flow into mixed-equity funds is disproportionately large, a sign of a rush to moderation.

“It’s easy to see why this is happening,” says Jeff Tjornehoj, a Lipper research analyst. “People are still licking their wounds from the bear market, and they’re saying, ‘I’m not very good at picking my own funds or asset allocation and I want to leave it to a professional.’ “

The problem is that making those decisions alters the complexion of an investor’s existing portfolio.

In general, balanced funds, life-cycle funds and asset-allocation funds can be a good choice for a core investment fund. It’s adding them to an existing portfolio that muddies the situation.

Consider, for example, that Thrivent Investment Management of Minneapolis two weeks ago launched seven new funds, four of them of the one-size-fits-all, asset-allocation variety.

Three of those four funds actually meet the definition of a “balanced fund.” While investors may associate the term with a 50-50 split between stocks and bonds, the truth is that balanced funds can essentially tilt their portfolio so that one type of asset makes up 75 percent of the total holdings.

So Thrivent’s Moderate Allocation currently has 58 percent of its assets in stock funds — the new issues invest entirely in Thrivent’s existing funds — 32 percent bond funds and 10 percent in cash or money-market securities. The Thrivent Moderately Conservative Allocation Fund, meanwhile, is 40 percent stocks, 45 percent bonds and 15 percent cash equivalents.

So let’s say an investor has an existing portfolio of mutual funds where stock issues represent 70 percent of assets, bond funds are 20 percent and money-market assets are 10 percent.

Now they put a big slug of money into Thrivent’s moderately conservative fund.

To see where their portfolio actually stands, the investor now has to track the allocation of their new fund, break out the dollar values behind the percentages and then add that money to what they hold in other funds.

It’s a much more demanding calculation, and one few investors will do with any regularity. It gets even tougher with two or more of these funds in the picture.

Investors may be right to make their portfolio more moderate, but rushing into funds that present “total solutions” can be a mistake, especially for those people whose portfolio doesn’t really fit into “one size fits all.”

Chuck Jaffe is senior columnist at CBS Marketwatch. He can be reached at jaffe@marketwatch.com or Box 70, Cohasset, MA 02025-0070.