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Turkish Lira Crisis Weigh on Markets: 5 Low-Risk Funds
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All the major bourses, including Russell 2000, registered heavy losses on Aug 10 following tensions over a significant decline in Turkish currency lira against the U.S. dollar. The U.S. dollar recently jumped 13% against the lira following concerns over the health of Turkey’s financial system.
Additionally, U.S. sanctions against top Turkish government officials and doubling of metal tariffs against Turkey added to the woes. Amid this turmoil, mutual funds that bear a lower level of risk as well as offer promising returns might be prudent investment options.
Decline in Turkey’s Lira Drag Sentiment
The Turkish lira lost around 13% against the U.S. dollar on Aug 10, which hit a one-year high as worries over Turkey’s capacity to repay foreign-currency debts rattled the global equity markets. Earlier on that day, this decline was even wider at 20% against the dollar after the United States decided to increase the tariffs on steel and aluminum imports from Turkey.
In a statement, the White House said that President Trump “has authorized the preparation of documents” to increase steel and aluminum import tariffs from Turkey. Turkish President Recep Tayyip Erdogan said that his country is facing an "economic war." Also, the European Central Bank (ECB) has raised concerns about the country’s economic stability, whose leader happens to be Erdogan.
Following these developments, on Aug 10, the S&P 500 decreased 0.7%, registering its biggest slump since Jun 27, also the Nasdaq fell 0.7% after eight straight days of gains. The Dow declined 0.8% on the day posting its worst one-day fall since Jul 11, while the Russell 2000 index was down by 0.2%.
How to Identify Low-Risk Funds?
Amid such a high level of uncertainty, it will be prudent to pick low-risk mutual funds. Before selecting funds, it is important to identify appropriate indicators that can effectively measure the risk level of a fund. This is why we have used Sharpe ratio to screen low-risk mutual funds. Sharpe ratio generally measures a fund’s average return relative to the level of volatility experienced by the same.
Further, Sharpe ratio indicates how much extra returns one can derive from a portfolio by taking on additional risk. This means that the higher the Sharpe ratio, the more attractive the fund will be among risk-averse investors. Now, most investors believe that mutual funds with a Sharpe ratio higher than 1 are lucrative. (Read: 4 Top-Ranked Mutual Funds with a Good Sharpe Ratio)
5 Best Low-Risk Funds on Focus
In this context, we have selected five mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), and have a three-year Sharpe ratio greater than 1. Moreover, these funds have impressive one-year annualized returns. They also have minimum initial investment within $5000 and low expense ratios.
We expect these funds to outperform their peers in the future. Remember the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
Colorado BondShares A Tax-Exempt (HICOX - Free Report) seeks returns, which are exempted from both Colorado state and federal income taxes. The fund invests heavily in tax-exempted securities, including bonds and notes. It may also invest in tax-free municipal leases issued by public authorities and political subdivisions under the State of Colorado.
HICOX carries an expense ratio of 0.61% compared with the category average of 0.92%. Moreover, HICOX requires a minimal initial investment of $500. The fund has one-year annualized returns of 5%.
The fund has a Zacks Mutual Fund Rank #1. Further, Fred R. Kelly is the fund manager of HICOX since 1990. HICOX has a Sharpe ratio of 2.39 for the last three years.
T. Rowe Price Ultra Short-Term Bond (TRBUX - Free Report) maintains a diversified portfolio by investing in bonds and other related securities that are rated investment-grade. TRBUX seeks maximization of income by investing mainly in investment-grade government and corporate securities that have a lower maturity period.
TRBUX carries an expense ratio of 0.35% compared with the category average of 0.52%. Moreover, TRBUX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 1.8%.
The fund has a Zacks Mutual Fund Rank #1. Further, Joseph K. Lynagh is the fund manager of TRBUX since 2012. TRBUX has a Sharpe ratio of 2.20 for the last three years.
Pacific Funds Floating Rate Income Advisor (PLFDX - Free Report) invests a large chunk of its assets in floating rate debt securities and floating rate loans. The fund may also invest around one-fourth of its assets in dollar-denominated securities issued by foreign companies based in developed markets.
PLFDX carries an expense ratio of 0.77% compared with the category average of 0.97%. Moreover, PLFDX requires a minimal initial investment of $0. The fund has one-year annualized returns of 4.3%.
The fund has a Zacks Mutual Fund Rank #2. Further, J.P. Leasure is one of the fund managers of PLFDX since 2011. PLFDX has a Sharpe ratio of 2.04 for the last three years.
Fidelity Conservative Income Bond invests the majority of its assets in high-quality investment-grade debt securities and dollar-denominated money market instruments of different types, and repurchase agreements for those securities. The fund has maturities of maximum three years.
FCONX carries an expense ratio of 0.35% compared with the category average of 0.52%. Moreover, FCONX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 1.7%.
The fund has a Zacks Mutual Fund Rank #1. Further, Robert Galusza is one of the fund managers of FCONX since 2015. FCONX has a Sharpe ratio of 1.95 for the last three years.
BBH Limited Duration N (BBBMX - Free Report) attains its investment goals by maintaining a diversified portfolio by investing in strong-performing fixed income securities. BBBMX invests in notes and bonds issued by U.S. governments and its agencies as well as by those issued by U.S. and non-U.S. companies and financial organizations.
BBBMX carries an expense ratio of 0.35% compared with the category average of 0.52%. Moreover, BBBMX requires a minimal initial investment of $5,000. The fund has one-year annualized returns of 1.8%.
The fund has a Zacks Mutual Fund Rank #1. Further, Andrew P. Hofer is one of the fund managers of BBBMX since 2011. BBBMX has a Sharpe ratio of 1.86 for the last three years.
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Turkish Lira Crisis Weigh on Markets: 5 Low-Risk Funds
All the major bourses, including Russell 2000, registered heavy losses on Aug 10 following tensions over a significant decline in Turkish currency lira against the U.S. dollar. The U.S. dollar recently jumped 13% against the lira following concerns over the health of Turkey’s financial system.
Additionally, U.S. sanctions against top Turkish government officials and doubling of metal tariffs against Turkey added to the woes. Amid this turmoil, mutual funds that bear a lower level of risk as well as offer promising returns might be prudent investment options.
Decline in Turkey’s Lira Drag Sentiment
The Turkish lira lost around 13% against the U.S. dollar on Aug 10, which hit a one-year high as worries over Turkey’s capacity to repay foreign-currency debts rattled the global equity markets. Earlier on that day, this decline was even wider at 20% against the dollar after the United States decided to increase the tariffs on steel and aluminum imports from Turkey.
In a statement, the White House said that President Trump “has authorized the preparation of documents” to increase steel and aluminum import tariffs from Turkey. Turkish President Recep Tayyip Erdogan said that his country is facing an "economic war." Also, the European Central Bank (ECB) has raised concerns about the country’s economic stability, whose leader happens to be Erdogan.
Following these developments, on Aug 10, the S&P 500 decreased 0.7%, registering its biggest slump since Jun 27, also the Nasdaq fell 0.7% after eight straight days of gains. The Dow declined 0.8% on the day posting its worst one-day fall since Jul 11, while the Russell 2000 index was down by 0.2%.
How to Identify Low-Risk Funds?
Amid such a high level of uncertainty, it will be prudent to pick low-risk mutual funds. Before selecting funds, it is important to identify appropriate indicators that can effectively measure the risk level of a fund. This is why we have used Sharpe ratio to screen low-risk mutual funds. Sharpe ratio generally measures a fund’s average return relative to the level of volatility experienced by the same.
Further, Sharpe ratio indicates how much extra returns one can derive from a portfolio by taking on additional risk. This means that the higher the Sharpe ratio, the more attractive the fund will be among risk-averse investors. Now, most investors believe that mutual funds with a Sharpe ratio higher than 1 are lucrative. (Read: 4 Top-Ranked Mutual Funds with a Good Sharpe Ratio)
5 Best Low-Risk Funds on Focus
In this context, we have selected five mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), and have a three-year Sharpe ratio greater than 1. Moreover, these funds have impressive one-year annualized returns. They also have minimum initial investment within $5000 and low expense ratios.
We expect these funds to outperform their peers in the future. Remember the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
Colorado BondShares A Tax-Exempt (HICOX - Free Report) seeks returns, which are exempted from both Colorado state and federal income taxes. The fund invests heavily in tax-exempted securities, including bonds and notes. It may also invest in tax-free municipal leases issued by public authorities and political subdivisions under the State of Colorado.
HICOX carries an expense ratio of 0.61% compared with the category average of 0.92%. Moreover, HICOX requires a minimal initial investment of $500. The fund has one-year annualized returns of 5%.
The fund has a Zacks Mutual Fund Rank #1. Further, Fred R. Kelly is the fund manager of HICOX since 1990. HICOX has a Sharpe ratio of 2.39 for the last three years.
T. Rowe Price Ultra Short-Term Bond (TRBUX - Free Report) maintains a diversified portfolio by investing in bonds and other related securities that are rated investment-grade. TRBUX seeks maximization of income by investing mainly in investment-grade government and corporate securities that have a lower maturity period.
TRBUX carries an expense ratio of 0.35% compared with the category average of 0.52%. Moreover, TRBUX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 1.8%.
The fund has a Zacks Mutual Fund Rank #1. Further, Joseph K. Lynagh is the fund manager of TRBUX since 2012. TRBUX has a Sharpe ratio of 2.20 for the last three years.
Pacific Funds Floating Rate Income Advisor (PLFDX - Free Report) invests a large chunk of its assets in floating rate debt securities and floating rate loans. The fund may also invest around one-fourth of its assets in dollar-denominated securities issued by foreign companies based in developed markets.
PLFDX carries an expense ratio of 0.77% compared with the category average of 0.97%. Moreover, PLFDX requires a minimal initial investment of $0. The fund has one-year annualized returns of 4.3%.
The fund has a Zacks Mutual Fund Rank #2. Further, J.P. Leasure is one of the fund managers of PLFDX since 2011. PLFDX has a Sharpe ratio of 2.04 for the last three years.
Fidelity Conservative Income Bond invests the majority of its assets in high-quality investment-grade debt securities and dollar-denominated money market instruments of different types, and repurchase agreements for those securities. The fund has maturities of maximum three years.
FCONX carries an expense ratio of 0.35% compared with the category average of 0.52%. Moreover, FCONX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 1.7%.
The fund has a Zacks Mutual Fund Rank #1. Further, Robert Galusza is one of the fund managers of FCONX since 2015. FCONX has a Sharpe ratio of 1.95 for the last three years.
BBH Limited Duration N (BBBMX - Free Report) attains its investment goals by maintaining a diversified portfolio by investing in strong-performing fixed income securities. BBBMX invests in notes and bonds issued by U.S. governments and its agencies as well as by those issued by U.S. and non-U.S. companies and financial organizations.
BBBMX carries an expense ratio of 0.35% compared with the category average of 0.52%. Moreover, BBBMX requires a minimal initial investment of $5,000. The fund has one-year annualized returns of 1.8%.
The fund has a Zacks Mutual Fund Rank #1. Further, Andrew P. Hofer is one of the fund managers of BBBMX since 2011. BBBMX has a Sharpe ratio of 1.86 for the last three years.
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 >>