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3 Balanced Mutual Funds to Buy If Markets Go South
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Volatility in the United States financial markets continues and investors are keenly waiting for the Federal Reserve’s upcoming interest rate decision. However, investors are concerned about Fed reactions to higher-than-expected Consumer Price Index (CPI) data, increased retail sales for December, and the rise in both services and manufacturing activity in January.
CPI, which is the most accepted gauge for inflation, increased 0.3% in December compared to a 0.1% increase in November. On a year-over-year basis, the index rose 3.4% compared with the 3.1% increase in November, mostly due to the rise in shelter costs. The S&P Global’s flash U.S. Composite PMI Output Index, which keeps track of the manufacturing and services sectors, increased to 52.3 this month from 50.9 in December, marking the highest since last June. A reading above 50 represents expansion in the sector.
Retail sales were up 5.6% on a year-over-year basis compared to up 4.8% in November, mostly due to an increase in the sale of clothing and accessories as well as online businesses during the holiday season. Also, in December, the economy added 216,000 jobs, the unemployment rate was 3.7%, flat month over month, and the average hourly wage rate increased 0.4% signaling a tight labor market. Though investors are expecting the central bank to be less hawkish this year, a strong labor market and expansion in services and manufacturing activity could prompt theFed to adopt a more cautious approach regarding its upcoming overnight interest rate decision.
Keeping in mind that the Fed can keep the interest rate high for longer to meet its ambitious 2% inflation target, prudent investors can consider parking their money in balanced funds, otherwise known as hybrid funds, to balance their portfolio if the market goes south. These funds 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 three balanced mutual funds that are expected to give a positive return and preserve the capital. 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 of 0.84.
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. Most of the fund’s holdings were in companies like Occidental Petroleum (2.3%), Fiserv (2.1%) and Sanofi (2.0%) as of Sep 30, 2023.
DODBX’s 3-year and 5-year returns are 8.0% and 10.2%, respectively. DODBX has an annual expense ratio of 0.52%.
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 (8.8%), Eli Lilly (5.2%) and Caterpillar (3.3%) as of Sep 30, 2023.
STFBX’s 3-year and 5-year returns are 7.6% and 8.6%, respectively. STFBX 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. Most of the fund’s holdings were in companies like Microsoft (4.7%), Apple (3.8%) and Amzon.com (2.5%) as of Aug 31, 2023.
FBAKX’s 3-year and 5-year returns are 5.7% and 12.5%, respectively. FBAKX has an annual expense ratio of 0.43%.
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3 Balanced Mutual Funds to Buy If Markets Go South
Volatility in the United States financial markets continues and investors are keenly waiting for the Federal Reserve’s upcoming interest rate decision. However, investors are concerned about Fed reactions to higher-than-expected Consumer Price Index (CPI) data, increased retail sales for December, and the rise in both services and manufacturing activity in January.
CPI, which is the most accepted gauge for inflation, increased 0.3% in December compared to a 0.1% increase in November. On a year-over-year basis, the index rose 3.4% compared with the 3.1% increase in November, mostly due to the rise in shelter costs. The S&P Global’s flash U.S. Composite PMI Output Index, which keeps track of the manufacturing and services sectors, increased to 52.3 this month from 50.9 in December, marking the highest since last June. A reading above 50 represents expansion in the sector.
Retail sales were up 5.6% on a year-over-year basis compared to up 4.8% in November, mostly due to an increase in the sale of clothing and accessories as well as online businesses during the holiday season. Also, in December, the economy added 216,000 jobs, the unemployment rate was 3.7%, flat month over month, and the average hourly wage rate increased 0.4% signaling a tight labor market. Though investors are expecting the central bank to be less hawkish this year, a strong labor market and expansion in services and manufacturing activity could prompt theFed to adopt a more cautious approach regarding its upcoming overnight interest rate decision.
Keeping in mind that the Fed can keep the interest rate high for longer to meet its ambitious 2% inflation target, prudent investors can consider parking their money in balanced funds, otherwise known as hybrid funds, to balance their portfolio if the market goes south. These funds 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 three balanced mutual funds that are expected to give a positive return and preserve the capital. 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 of 0.84.
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. Most of the fund’s holdings were in companies like Occidental Petroleum (2.3%), Fiserv (2.1%) and Sanofi (2.0%) as of Sep 30, 2023.
DODBX’s 3-year and 5-year returns are 8.0% and 10.2%, respectively. DODBX has an annual expense ratio of 0.52%.
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 (8.8%), Eli Lilly (5.2%) and Caterpillar (3.3%) as of Sep 30, 2023.
STFBX’s 3-year and 5-year returns are 7.6% and 8.6%, respectively. STFBX 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. Most of the fund’s holdings were in companies like Microsoft (4.7%), Apple (3.8%) and Amzon.com (2.5%) as of Aug 31, 2023.
FBAKX’s 3-year and 5-year returns are 5.7% and 12.5%, respectively. FBAKX has an annual expense ratio of 0.43%.
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 >>