3 Large-Cap Value Mutual Funds to Strengthen Your Portfolio

Volatility continues on Wall Street as rising inflation and other key economic data weigh on investors' sentiment. The Consumer Price Index (CPI), which is the most accepted gauge for inflation, trended higher in the month of February. An early rate cut is unlikely. However, the Fed Chairman’s dovish comment before the Senate suggests that the central bank will initiate interest rate reduction this year.

Meanwhile, the key indexes, the Dow, the S&P 500 and the tech-heavy Nasdaq, have returned 3.5%, 8.5% and 8.4%, respectively, in the year-to-date period.

CPI for the month of February rose 0.4% and 3.2% from a year ago. Though the month-on-month increase is in line with expectations, the annual rate was slightly higher than the street expectation of 3.1%. Also, the Purchasing Managers’ Index (PMI) reported by the Institute of Supply Management (ISM) for the month of February came in at 47.8 compared with the street expectation of 49.5. A reading below 50 indicates a contraction in manufacturing activities. The Job Openings and Labor Turnover Survey, or JOLTS report of the Department of Labor, showed that there were 1.45 jobs for every unemployed person in January, up from 1.42 in December, indicating strength in the labor market.

By keeping the interest rate in the range of 5.25-5.5%, the highest level since 2001, the Fed wants to get rid of the sticky inflation. It intends to make borrowing money more expensive, thereby cooling off demand. Although investors are expecting the central bank to be less hawkish this year, the Fed will most probably stretch the interest rate high for longer tomeet itsinflation target of 2% andcreate a soft landing for the economy.

It would thus be a prudent move for investors who want capital preservation and future returns to 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 stocks 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 based on extensive quantitative and fundamental research by the portfolio manager. DRGVX also invests a small portion of its net assets in foreign equity securities with similar economic features.

Keith Howell Jr. has been one of the lead managers 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 14.1% 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.

TCW Relative Value Dividend Appreciation Fund TGDFX invests most of its assets along with borrowings, if any, in equity securities of dividend-paying companies. TGDFX generally invests in companies that have leaders who efficiently manage environmental sustainability and social responsibilities with good governance and solid financial resources.

Diane E. Jaffee has been one of the lead managers of TGDFX since Nov 15, 2001. Most of the fund’s exposure was in companies like Broadcom (4.4%), JPMorgan Chase (3.9%) and McKesson (3.9%) as of Oct 31, 2023.

TGDFX’s three-year and five-year annualized returns are 13.6% and 12.1%, respectively. TGDFX has an annual expense ratio of 0.70%.

Putnam Large Cap Value PEQSX invests primarily in domestic companies, which, according to the fund’s advisors, are undervalued by the market and have potential for capital growth, current income, or both. PEQSX advisors invest in companies based on factors such as valuation, financial strength, growth potential, industry position, projected future earnings, cash flows and dividend history.

Lauren B. DeMore has been one of the lead managers of PEQSX since Aug 30, 2019. Most of the fund’s exposure was 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%.

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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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