3 Value Mutual Funds to Navigate the Ongoing Market Volatility
September was remarkable for Wall Street, although it is typically considered the worst month for stocks. During this time, the Dow and the S&P 500 reached new record closing highs. However, October brought back volatility as renewed concerns over the economy’s health dented investors’ confidence.
Investors are now trying to gauge the Federal Reserve’s next move with its rate cuts, which could keep markets volatile for a longer period. Given this situation, it would be ideal to invest in value funds like T. Rowe Price Capital Appreciation PRWCX, Longleaf Partners LLPFX and Barrett Opportunity Retail SAOPX.
On Thursday, the Dow recorded its sixth straight session of losses as volatility continued on Wall Street. The S&P 500 somehow finished in the green after ending in negative territory for three consecutive sessions.
Volatility has persisted since the inflation report was released earlier this month. The consumer price index (CPI) increased by 0.2% month over month in September, matching August’s rise but exceeding the consensus estimate of a 0.1% increase.
Year over year, the CPI rose by 2.4%. Core CPI, which excludes the volatile food and energy sectors, jumped by 3.3% year over year, surpassing analysts’ expectations of a 3.2% increase.
The unexpected jump in inflation has raised concerns about a slowing economy and reignited fears of a lingering recession.
The Federal Reserve cut interest rates by 50 basis points at its September policy meeting, its first rate cut since March 2020. The current benchmark policy rate now ranges between 4.75% and 5%, the lowest since April 2023. Markets are hopeful that the Fed will implement two additional cuts of 25 basis points each in November and December.
However, recent inflation data has raised concerns that the Federal Reserve may slow its rate-cut strategy, leading to a decline in consumer sentiment in October.
This has been denting consumer sentiment. The University of Michigan’s preliminary report showed that consumer sentiment slipped to 68.9 in October from a final reading of 70.1 the previous month, more than the consensus estimate of a reading of 70.8. The uncertainty over the economy’s health and the Federal Reserve’s next move could keep markets volatile for a longer period.
Given this uncertainty, investing in value funds may be a wise strategy for reducing risks during uncertain times. Value funds usually comprise stocks that are priced lower than their fundamental metrics, such as earnings, book value and debt-to-equity ratios. These funds often provide dividend payments, making them attractive choices for investors looking for profitable investment opportunities.
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).
T. Rowe Price Capital Appreciation fund seeks maximum long-term capital appreciation. PRWCX primarily invests in the common stocks of established U.S. companies believed to have above-average potential for capital growth. Common stocks typically constitute at least half of total assets.
T. Rowe Price Capital Appreciation fund has a history of positive total returns for more than 10 years. Specifically, PRWCX has returned nearly 7.8% and 11.8% over the past three and five-year periods, respectively. T. Rowe Price Capital Appreciation fund has a Zacks Mutual Fund Rank #1 and its annual expense ratio is 0.70%, which is lower than the category average of 0.91%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Longleaf Partners fund seeks long-term capital growth. LLPFX invests in the equity securities of a limited number of mid and large-cap companies that are believed to be significantly undervalued.
Longleaf Partners fund has a history of positive total returns for more than 10 years. Specifically, LLPFX has returned nearly 3.8% and 9.1% over the past three and five-year periods, respectively. Longleaf Partners fund has a Zacks Mutual Fund Rank #1 and its annual expense ratio is 0.79%, which is lower than the category average.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Barrett Opportunity Retail fund seeks to achieve above-average long-term capital appreciation. SAOPX invests primarily in common stocks and securities convertible into or exchangeable for common stock such as convertible preferred stock or convertible debt securities.
Barrett Opportunity Retail fund has a history of positive total returns for more than 10 years. Specifically, SAOPX has returned nearly 13.2% and 13.6% over the past three and five-year periods, respectively. Barrett Opportunity Retail fund has a Zacks Mutual Fund Rank #2 and its annual expense ratio is 0.99%, which is lower than the 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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