In recent days, the Federal Reserve has been sending dovish signals about monetary policy. Market participants are expecting the Fed to start cutting rates from its September meeting, with probably one more or possibly two rate-cut iterations before the year ends.
Inflation has been slowing down in recent months and other economic indicators have been suggesting that the time may be ripe for the first rate cut. In fact, a couple of weeks back, fears of a recession were dominating proceedings on Wall Street because of weak numbers from the labor market. While there might not be any further recession talks doing the rounds currently, the central bank almost certainly has taken cognizance and the loosening of monetary policy is on the way.
Yet, the financial sector has thrived over the past 12 months, with the Fed continuing to keep the rate “higher for longer.” The Financial Select Sector SPDR (XLF) has grown 17.6% year to date and 31.5% over the 12 months ending Aug 20, 2024. In this environment, The Vanguard Group, Inc., one of the world’s largest asset managers, is poised to do well.
Established on May 1, 1975, Vanguard manages a portfolio exceeding $9.3 trillion in assets and caters to over 50 million investors. The privately managed investment firm functions within a unique investor-owned structure where shareholders have ownership of the funds, which in turn own Vanguard itself. This setup is designed to eliminate any potential conflicts of interest and ensure that the focus remains on maximizing value for investors.
Vanguard mutual funds offer a wide range of investment options ranging from index funds to actively managed funds, and are all managed with a disciplined focus on long-term growth. Vanguard's commitment to low-cost, no-load funds ensures no charges for investors during the buying or selling of fund shares.
Hence, investing in Vanguard mutual funds may provide the much-required stability and growth potential in a market that is expected to do well in the coming months. Astute investors should consider such funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have thus selected three such mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns and minimum initial investments within $5000, as well as carry a low expense ratio.
Vanguard Energy Fund VGENX invests most of its net assets in common stocks. VGENX advisors generally invest in companies that are principally engaged in the energy industry, like exploration, production, and transmission of energy or fuels, manufacturing and servicing of products required for energy research, energy conservation and pollution control.
G. Thomas Levering has been the lead manager of VGENX since Jan 15, 2020. The three top holdings of the fund are Shell PLC (9.6%), ExxonMobil (7.7%) and TotalEnergies (7.2%).
VGENX’s three-year and five-year annualized returns are almost 19.1% and 6.6%, respectively. It has an annual expense ratio of 0.44% compared to the category average of 1.11%. VGENX has a Zacks Mutual Fund Rank #2. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Vanguard Windsor Investor Shares VWNDX invests most of its net assets in common stocks of large and mid-cap domestic companies, which, according to its advisors, are undervalued. VWNDX advisors consider undervalued stocks as those that are out of favor with investors and are trading at prices below average in relation to measures such as earnings and book value.
Richard S. Pzena has been the lead manager of VWNDX since Aug 1, 2012. Three top holdings of the fund are Tyson Foods (1.9%), Edison International (1.9%) and Pfizer (1.8%).
VWNDX’s three-year and five-year annualized returns are almost 9.2% and 13.2%, respectively. It has an annual expense ratio of 0.37% compared to the category average of 0.93%. VGENX has a Zacks Mutual Fund Rank #1.
Vanguard Equity Income Fund VEIPX invests primarily in common stocks of mid and large-cap companies that generate decent dividend income and are, in the opinion of the fund advisor, undervalued relative to similar stocks.
Matthew C Hand has been the lead manager of VEIPX since Oct 4, 2021. Three top holdings of the fund are JPMorgan Chase (4.2%), Merck (2.7%) and Johnson & Johnson (2.5%).
VEIPX’s three-year and five-year annualized returns are almost 8.9% and 11%, respectively. It has an annual expense ratio of 0.27% compared to the category average of 0.93%. VGENX has a Zacks Mutual Fund Rank #1.
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