3 Low-Beta Mutual Funds for Your Portfolio

U.S. stocks had a rocky start to April, courtesy of the coronavirus pandemic. The three major indices posted declines of at least 4% at the start of a fresh quarter. The Dow, the S&P 500 and the Nasdaq composite declined 23.2%, 20% and 14.2%, respectively. While this marked the Dow’s biggest quarterly selloff since 1987, the S&P 500 posted its biggest decline since the last three months of 2008.

Meanwhile, the coronavirus has dealt a huge blow to markets globally. Valuations have gone for a toss across every asset class and sector. Also, volatility-induced selling has hit the bourses. Such developments have had an adverse effect on some of the best stock market performers, forcing the major market indices into correction.           

Furthermore, lockdowns and social distancing have disrupted supply chains of almost every business. In fact, the Federal Reserve’s monetary easing did little to improve investors’ sentiments. In this context, it is important to safeguard one’s portfolio from such uncertainties and invest in low-beta mutual funds.

Such funds are inherently less volatile than the markets they trade in. In this case, a low beta ranges from 0 to 1. We have selected three low-beta mutual funds that have given positive one-year annualized returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy) or # 2(Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio.

The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without several commission charges that are associated with stock purchases are the primary reasons why one should be parking their money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Lord Abbett Bond Debenture Fund Class A LBNDX invests a bulk of its assets in fixed income securities, including debentures and bonds. The fund may also invest heavily in high-yield securities or junk bonds. LBNDX may invest around one-fifth of its assets in various kinds of equity securities.

This High Yield - Bonds product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 5.2% and 4.9%, respectively.

LBNDX has an annual expense ratio of 0.79%, which is below the category average of 1.02%. The fund carries a Zacks Mutual Fund Rank #2 and has one-year annualized returns of 8.3%. LBNDX carries a three-year beta of 0.26.

Voya Global Bond Fund Class W IGBWX invests a large chunk of its assets in bonds issued by companies from different countries. Although the fund invests mainly in investment-grade debt securities, its investment is not limited to government and corporate bonds. IGBWX seeks maximization of returns through both growth of capital and income.

This International Bond - Developed product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 4.2% and 3%, respectively.

IGBWX has an annual expense ratio of 0.66%, which is below the category average of 0.96%. The fund carries a Zacks Mutual Fund Rank #2 and has one-year annualized returns of 7.2%. It carries a three-year beta of 0.58.

Fidelity Equity Dividend Income Fund FEQTX seeks reasonable income and capital appreciation. FEQTX normally invests a major portion of assets in equity securities. It also invests primarily in income-producing equity securities which tend to lead to investments in large capital 'value' stocks.

This Large Cap Value product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 3.6% and 5.1%, respectively.

FEQTX has an annual expense ratio of 0.60%, which is below the category average of 0.99%. The fund sports a Zacks Mutual Fund Rank #1 and has one-year annualized returns of 1.1%. FEQTX carries a three-year beta of 0.97.

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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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