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5 Balanced Mutual Funds to Buy Amid Market Meltdown
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Major U.S. indexes is on a sell-off mode mostly due to a recent surge in U.S. Treasury bond yields. On Oct 3, 2023, the 10-year Treasury bond yield which is considered as the broader indicator of investor confidence touched 4.8%, hitting the highest in 16 years.
The 10-year bond yield has traded above 4% since early August, a level unseen between 2008 to 2021 period. But the recent climb of 50 basis points, which was seen within a fortnight, indicates caution among market participants. Also, the CBOE Volatility Index, which generally measures the fear gauge, touched 19.78 on Oct 3, the highest level since May 2023.
Federal Reserve Chairman Jerome Powell continues to stress on a stable inflation rate. Although the Fed’s long-term target is 2% the consumer price index, which is the most acceptable gauge for inflation, has moved up by 3.2% and 3.7% year on year for the month of July and August, respectively, after a favorable decline till June at 3%. The Fed has left the doors open for further rate hike till the end of this year but kept the overnight interest rates unchanged within the range of 5.25-5.5% in its September policy meeting.
The current overnight interest rate, which is the highest in 22 years, has pushed the cost of borrowing higher in a range the average Americans and corporates are not used to. Investors fear that prolonged high interest rates may push various industries and the overall economy into a recession.
The Fed expects further easing in the labor market to get rid of sticky inflation. But August job openings data surpassed street expectations by adding 690,000 positions, signaling a tight labor market. Investors fear that a strong labor market could prompt the Federal Reserve to raise interest rates again.
Keeping in mind that the monetary policy could remain tight for some time and the era of low interest rates is a distant future, prudent investors can consider parking their money in balanced funds, otherwise known as hybrid funds. These usually invest in equity and debt instruments in various proportions, depending upon the market conditions. The primary aim of these funds is to provide investors with a stable return having a balance between risk and capital appreciation. Also, these mutual funds are believed to provide higher returns than pure, fixed-income investments.
Thus, from an investment standpoint, we have highlighted five balanced mutual funds that are expected to give a positive return in such uncertain times. 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).
These funds, by the way, have given impressive 3-year and 5-year returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy), offer a minimum initial investment within $5,000, and carry a low expense ratio compared to the category average.
Dodge & Cox Balanced Fund (DODBX - Free Report) seeks long-term growth capital appreciation along with current income by investing most of its net assets in a diversified portfolio of equity and debt securities in various proportions. DODBX advisors may also invest a small portion of their net assets in U.S. dollar-denominated equity or debt securities of foreign issuers traded in the United States but not part of the S&P 500 Index.
David C. Hoeft has been the lead manager of DODBX since Dec 31, 2001, and most of the fund’s holdings were in companies like Fiserv (2.5%), Sanofi (2.4%) and Occidental Petroleum (2.1%) as of Jun 30, 2023.
DODBX’s 3-year and 5-year returns are 10.2% and 7.1%, respectively. DODBX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.52% compared to the category average of 0.84%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
State Farm Balanced Fund (STFBX - Free Report) invests most of its net assets in equity securities of preferably large and medium-cap companies. STFBX advisors consider large and medium-cap companies as defined by S&P Dow Jones Indices at the time of investment.
Christine Tinker has been the lead manager of STFBX since Mar 30, 2021. Most of the fund’s holdings were in companies like Apple (8.7%), Walt Disney (4.1%) and Eli Lilly (3.4%) as of Mar 31, 2023.
STFBX’s 3-year and 5-year returns are 7.6% and 8.6%, respectively. STFBX has a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.14%.
Fidelity Balanced Fund (FBAKX - Free Report) invests most of its net assets in a portfolio consisting of equity securities, bonds, and other debt securities, includinglower-quality debt securities and junk bonds. FBAKX advisors also invest a small portion of their assets in fixed-income senior securities.
Steven Kaye has been the lead manager of FBAKX since Sep 29, 2008, and most of the fund’s holdings were in companies like Microsoft (5.1%), Apple (3.9%) and Amzon.com (2.2%) as of May 31, 2023.
FBAKX’s 3-year and 5-year returns are 6.8% and 8.7%, respectively. FBAKX has a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.43%.
Mairs & Power Balanced (MAPOX - Free Report) fund invests most of its net assets in the common stock of domestic companies and other securities convertible into common stock as well as fixed-income securities like corporate bonds and U.S. government securities. MAPOX advisors may also invest in foreign issuers that are listed on U.S. stock exchanges or represented by American Depositary Receipts.
Kevin V. Earley has been the lead manager of MAPOX since Dec 31, 2014, and most of the fund’s holdings are in companies like Microsoft (4.6%), Alphabet (3.4%) and Eli Lilly (2.6%) as of Mar 31, 2023.
MAPOX’s 3-year and 5-year returns are 5.4% and 6.1%, respectively. MAPOX has a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.69%
Vanguard Wellington Investment (VWELX - Free Report) fund invests more than half of its net assets, mostly in dividend-paying equity securities of large-cap companies. VWELX advisors also invest in fixed-income securities like investment-grade corporate bonds, government agency bonds, and mortgage-backed securities with the potential to generate current income.
Loren L. Moran has been the lead manager of VWELX since Jan 26, 2017. Most of the fund’s holdings were in companies like Microsoft (5.8%), Alphabet (3.7%) and Apple (2.9%) as of May 31, 2023.
VWELX’s 3-year and 5-year returns are 5.3% and 6.9%, respectively. VWELX has a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.26%.
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5 Balanced Mutual Funds to Buy Amid Market Meltdown
Major U.S. indexes is on a sell-off mode mostly due to a recent surge in U.S. Treasury bond yields. On Oct 3, 2023, the 10-year Treasury bond yield which is considered as the broader indicator of investor confidence touched 4.8%, hitting the highest in 16 years.
The 10-year bond yield has traded above 4% since early August, a level unseen between 2008 to 2021 period. But the recent climb of 50 basis points, which was seen within a fortnight, indicates caution among market participants. Also, the CBOE Volatility Index, which generally measures the fear gauge, touched 19.78 on Oct 3, the highest level since May 2023.
Federal Reserve Chairman Jerome Powell continues to stress on a stable inflation rate. Although the Fed’s long-term target is 2% the consumer price index, which is the most acceptable gauge for inflation, has moved up by 3.2% and 3.7% year on year for the month of July and August, respectively, after a favorable decline till June at 3%. The Fed has left the doors open for further rate hike till the end of this year but kept the overnight interest rates unchanged within the range of 5.25-5.5% in its September policy meeting.
The current overnight interest rate, which is the highest in 22 years, has pushed the cost of borrowing higher in a range the average Americans and corporates are not used to. Investors fear that prolonged high interest rates may push various industries and the overall economy into a recession.
The Fed expects further easing in the labor market to get rid of sticky inflation. But August job openings data surpassed street expectations by adding 690,000 positions, signaling a tight labor market. Investors fear that a strong labor market could prompt the Federal Reserve to raise interest rates again.
Keeping in mind that the monetary policy could remain tight for some time and the era of low interest rates is a distant future, prudent investors can consider parking their money in balanced funds, otherwise known as hybrid funds. These usually invest in equity and debt instruments in various proportions, depending upon the market conditions. The primary aim of these funds is to provide investors with a stable return having a balance between risk and capital appreciation. Also, these mutual funds are believed to provide higher returns than pure, fixed-income investments.
Thus, from an investment standpoint, we have highlighted five balanced mutual funds that are expected to give a positive return in such uncertain times. 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).
These funds, by the way, have given impressive 3-year and 5-year returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy), offer a minimum initial investment within $5,000, and carry a low expense ratio compared to the category average.
Dodge & Cox Balanced Fund (DODBX - Free Report) seeks long-term growth capital appreciation along with current income by investing most of its net assets in a diversified portfolio of equity and debt securities in various proportions. DODBX advisors may also invest a small portion of their net assets in U.S. dollar-denominated equity or debt securities of foreign issuers traded in the United States but not part of the S&P 500 Index.
David C. Hoeft has been the lead manager of DODBX since Dec 31, 2001, and most of the fund’s holdings were in companies like Fiserv (2.5%), Sanofi (2.4%) and Occidental Petroleum (2.1%) as of Jun 30, 2023.
DODBX’s 3-year and 5-year returns are 10.2% and 7.1%, respectively. DODBX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.52% compared to the category average of 0.84%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
State Farm Balanced Fund (STFBX - Free Report) invests most of its net assets in equity securities of preferably large and medium-cap companies. STFBX advisors consider large and medium-cap companies as defined by S&P Dow Jones Indices at the time of investment.
Christine Tinker has been the lead manager of STFBX since Mar 30, 2021. Most of the fund’s holdings were in companies like Apple (8.7%), Walt Disney (4.1%) and Eli Lilly (3.4%) as of Mar 31, 2023.
STFBX’s 3-year and 5-year returns are 7.6% and 8.6%, respectively. STFBX has a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.14%.
Fidelity Balanced Fund (FBAKX - Free Report) invests most of its net assets in a portfolio consisting of equity securities, bonds, and other debt securities, includinglower-quality debt securities and junk bonds. FBAKX advisors also invest a small portion of their assets in fixed-income senior securities.
Steven Kaye has been the lead manager of FBAKX since Sep 29, 2008, and most of the fund’s holdings were in companies like Microsoft (5.1%), Apple (3.9%) and Amzon.com (2.2%) as of May 31, 2023.
FBAKX’s 3-year and 5-year returns are 6.8% and 8.7%, respectively. FBAKX has a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.43%.
Mairs & Power Balanced (MAPOX - Free Report) fund invests most of its net assets in the common stock of domestic companies and other securities convertible into common stock as well as fixed-income securities like corporate bonds and U.S. government securities. MAPOX advisors may also invest in foreign issuers that are listed on U.S. stock exchanges or represented by American Depositary Receipts.
Kevin V. Earley has been the lead manager of MAPOX since Dec 31, 2014, and most of the fund’s holdings are in companies like Microsoft (4.6%), Alphabet (3.4%) and Eli Lilly (2.6%) as of Mar 31, 2023.
MAPOX’s 3-year and 5-year returns are 5.4% and 6.1%, respectively. MAPOX has a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.69%
Vanguard Wellington Investment (VWELX - Free Report) fund invests more than half of its net assets, mostly in dividend-paying equity securities of large-cap companies. VWELX advisors also invest in fixed-income securities like investment-grade corporate bonds, government agency bonds, and mortgage-backed securities with the potential to generate current income.
Loren L. Moran has been the lead manager of VWELX since Jan 26, 2017. Most of the fund’s holdings were in companies like Microsoft (5.8%), Alphabet (3.7%) and Apple (2.9%) as of May 31, 2023.
VWELX’s 3-year and 5-year returns are 5.3% and 6.9%, respectively. VWELX has a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.26%.
Want key mutual fund info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>