Yahoo Finance 3 Large-Cap Value Funds to Buy Amid Uncertainty Over Rate Cuts
Volatility has returned to Wall Street as concerns over the economy’s future continue to grow. Slowing GDP growth, rising inflation and uncertainty over the timing of rate cuts are making investors jittery.
The Federal Reserve left interest rates unchanged in its May FOMC meeting in the current range of 5.35-5.5%. The central bank has left interest rates unaltered since July 2023 and the May decision to leave it unchanged was highly expected.
Also, Fed Chair Jerome Powell said that it is unlikely that there will be any further rate hikes. However, he added that inflation, which was declining sharply, has again started increasing and there has been little progress lately in bringing inflation down to its 2% target.
Also, he left investors in uncertainty as he didn’t hint at the timeline for the first rate cut.
Understandably, the Federal Reserve is in no rush to cut interest rates as inflation has resumed its climb once again this year after falling below 3% in December 2023. The consumer price index (CPI) rose 3.5% year over year in March.
The U.S. economy also slowed in the first quarter as GDP grew a modest 1.6%, far lower than the consensus estimate of 2.2% and 3.4% in the final quarter of 2023.
In the current scenario, an astute investor might consider investing in large-cap value funds as a strategic way to mitigate risks. Historically, large-cap funds have shown stability and are typically viewed as more dependable compared to mid- or small-cap funds.
Also, value funds, which typically include stocks priced below fundamental metrics like earnings, book value and debt-to-equity ratios, and often provide dividend payments, present an enticing option for investors in search of profitable investment opportunities.
By investing in large-cap value funds, investors can potentially benefit from the stability of large-cap stocks while capitalizing on the potential for growth and income provided by value-oriented investments.
3 Best Choices
We've identified three large-cap value mutual funds that have demonstrated impressive annualized returns over 3-year and 5-year periods. These funds also hold a Zacks Mutual Fund Rank of #1 (Strong Buy), require an initial investment of no more than $5,000 and have a low expense ratio.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Homestead Value HOVLX fund seeks capital growth over the long term and, secondarily, income. Under ordinary conditions, HOVLX invests at least 80% of its total assets in common stocks of established companies.
HOVLX’s 3-year and 5-year annualized returns are 10.8% and 13%, respectively. Homestead Valuefund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.64%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Northern Income Equity NOIEX fund seeks to provide a high level of current income with long-term capital appreciation as a secondary objective. NOIEX’s approach is to identify the securities of companies that generate high current yields and offer prospects for growth and possible capital appreciation. In pursuing its objective, the Northern Income Equity fund invests at least 65% of its total assets in a mix of income-producing equity securities, with no limit on the fund's ability to invest in non-investment grade fixed income and convertible debt securities.
NOIEX’s 3-year and 5-year annualized returns are 11.1% and 13%, respectively. Northern Income Equity fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.49%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
MFS Blended Research Value Equity A BRUDX fund invests in stocks with a market cap of $10 billion or more, but whose share prices do not reflect their intrinsic value. BRUDX mainly invests in equities, has a long reputation of salutary performance, and has yearly returns of 10.05% over the last five years.
BRUDX’s 3-year and 5-year annualized returns are 10.8% and 11.3%, respectively. MFS Blended Research Value Equity A fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.74%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
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