3 Large-Cap Value Mutual Funds to Add to Your Portfolio

Wall Street remains volatile due to various speculations over the timeline of the benchmark interest rate cut by the central bank and the release of key economic data. After a spike in the consumer price index (CPI) in recent months, investors are eagerly waiting for the CPI data for the month of March to be released on Apr 10, 2024.

Major U.S. indexes like the Dow, the S&P 500 and the tech-heavy NASDAQ have delivered positive returnsof 3.8%, 9.3% and 8.4%, respectively, over the year-to-date period.

The CPI rose 0.4% in February after a 0.3% increase in January 2024.The year-on-year rise of 3.2% in inflation is still higher than the Federal Reserve’s expectation of 2% and the Wall Street’s expectation of 3.1%. The central bank, in its last policy meet, kept the interest rate unchanged in the range of 5.25-5.5%. However, Fed Chairman Jerome Powell reiterated his comment of beginning interest rate cut this year after seeing favorable inflation and economic conditions.

The U.S. economy continues to be resilient as GDP growth for fourth-quarter 2023 was 3.4%, ahead of the consensus estimate of 3.2%. According to the reports of Institute of Supply Management, the services sector Purchasing Managers’ Index (PMI) came in at 51.4%, missing the consensus estimate of 52.7%. The metric for February was 52.6%. Notably, any reading above 50% indicates expansion in services activities.

The Job Openings and Labor Turnover Survey, or JOLTS, held steady in February as the numbers indicate that there were 1.36 vacancies for every unemployed person, down from 1.43 in January. The number of job openings, which is considered a measure of labor demand, increased by 8,000 to 8.756 million on the last day of February.

To achieve its inflation target, the Fed can keep the interest rate high for longer. A higher interest rate impacts corporate performance and, thereby, stock prices. Amid such economic uncertainties, prudent investors who want capital preservation and future returns, can invest or take refuge in mutual funds having large-cap value companies as their major holdings. Large-cap stocks are better choices than small or mid-cap stocks for risk-averse investors. These stocks have a long-term performance history and are more stable compared to mid or small caps. Companies with a market capitalization of more than $10 billion are generally considered large caps.

Since the broader market trend is still uncertain, investors should look for stocks that tend to trade at a price lower than their fundamentals. Thus, investors should choose funds with value stocks as they are expected to outperform growth ones once the market begins to recoup from the current downtrend.

We have thus selected three large-cap value mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy), have positive three-year and five-year annualized returns and minimum initial investments within $5000, and carry a low expense ratio of 1% or less. Notably, mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

BNY Mellon Dynamic Value Fund DRGVX invests most of its assets along with borrowings, if any, in stocks of companies that have value, sound business fundamentals, and positive business momentum evaluated on extensive quantitative and fundamental research using a bottom-up approach by portfolio managers. DRGVX also invests a small portion of its net assets in foreign equity securities with similar economic features.

Keith Howell Jr. has been the lead manager of DRGVX since Sep 21, 2021. Most of the fund’s exposure was in companies like Berkshire Hathaway (4.3%), JPMorgan Chase (4.2%) and Danaher (3.3%) as of Nov 30, 2023.

DRGVX’s three-year and five-year annualized returns are 14% and 14.1%, respectively. DRGVX has an annual expense ratio of 0.68%.

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

Putnam Large Cap Value PEQSX fund seeks value and current income, or both, by investing most of its net assets in common stocks of domestic companies that, according to the fund’s advisors, are undervalued. PEQSX advisors choose to invest in stocks based on a company's valuation, growth potential, competitive position in the industry, estimated future earnings, cash flows and dividend payout history.

Lauren B. DeMore has been the lead manager of PEQSX since Aug 30, 2019. Most of the fund’s exposure is in companies like Exxon Mobil (3.8%), Microsoft (3.5%) and Walmart (2.9%) as of Oct 31, 2023.

PEQSX’s three-year and five-year annualized returns are 12.8% and 13.5%, respectively. PEQSX has an annual expense ratio of 0.55%.

Voya Large Cap Value Portfolio IPEIX invests most of its assets, along with borrowings, if any, in a portfolio of large-cap dividend-paying equity securities. IPEIX advisors consider large-cap companies as those with market capitalization within the range of companies listed on the Russell 1000 Value Index at the time of purchase

Vincent J. Costa has been the lead manager of IPEIX since Jun 29, 2013. Most of the fund’s exposure is in companies like AT&T (4%), Philip Morris International (3.9%) and Bank of America (3.2%) as of Sep 30, 2023.

IPEIX’s three-year and five-year annualized returns are 11.4% and 12.2%, respectively. IPEIX has an annual expense ratio of 0.64%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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