3 Large-Cap Value Funds to Play Safe Amid Ongoing Economic Uncertainty

Markets have somewhat stabilized, with major indexes coming off their strongest week since April. However, volatility continues as several factors continue to dent investors’ confidence.

Oil prices have stabilized, while hopes of a deal between Iran and Oman have improved. However, uncertainty about the health of the economy, the progress of peace talks between the United States and Iran, and the Federal Reserve’s plans for future interest rates continue to weigh on investor sentiment.

Given this backdrop, investors may consider large-cap value funds, such as American Funds American Mutual A AMRMX,Vanguard Equity Income Fund VEIPX and Northern Income Equity NOIEX.

Wall Street Volatility Continues

Geopolitical tensions in the Middle East have kept markets volatile for months. Major indexes rallied last week as technology stocks recovered from a sell-off sparked by concerns about the sustainability of AI-related chip stocks and the massive investments that tech giants continue to make in AI infrastructure.

Investor sentiment received another boost on Monday amid hopes that Iran and Oman could soon reach an agreement to reopen the Strait of Hormuz. However, Iran has remained firm in refusing to resume negotiations with the United States until Washington meets several of its conditions.

Investors are also hopeful that the Federal Reserve could postpone its rate-hike plans after July’s nonfarm payrolls report showed an unexpected decline in employment. However, the Fed has yet to signal any plans for near-term rate cuts.

Meanwhile, the conflict between the United States and Iran remains unresolved. Inflation eased in June as oil prices declined, but it remains well above the Fed’s 2% target. As a result, uncertainty continues to cloud the markets and could contribute to further volatility in the months ahead.

3 Best Choices

We've identified three large-cap value mutual funds that have given 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).

American Funds American Mutual A fund seeks to provide balanced accomplishment of three objectives: current income, capital growth and conservation of principal. AMRMX invests primarily in common stocks, securities convertible into common stocks, non-convertible preferred stocks, U.S. government securities, bonds rated A or better and cash. 

AMRMX’s 3-year and 5-year annualized returns are 15.3% and 10.8%, respectively. American Funds American Mutual Afund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.57%. which is higher than the category average of 0.93%.

To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Vanguard Equity Income Fund seeks a high level of dividend income and long-term growth of income and capital. VEIPX invests in a diversified group of large and mid-capitalization stocks with above-average dividend yields and reasonable prospects for long-term price appreciation. 

VEIPX’s 3-year and 5-year annualized returns are 15.9% and 11.2%, respectively. Vanguard Equity Income Fund has an annual expense ratio of 0.26%.

To see how this fund performed compared to its category, and other 1 and 2 (Buy) Ranked Mutual Funds, please click here.

Northern Income Equity 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.

NOIEX’s 3-year and 5-year annualized returns are 20.9% and 13.7%, respectively. Northern Income Equity fund has an annual expense ratio of 0.48%, which is lower than its category average.

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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