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3 Solid Funds to Buy Amid Continuing Market Volatility

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November has been an impressive month for markets so far after a solid rebound in October, following a disappointing September. All three major indexes closed October in the green and are on track for a robust November. However, market participants are still concerned about the aggressive rate-hike stance adopted by the Fed, as they believe this could push the economy into recession.

Moreover, the Fed in its November meeting, once again hinted that it has no immediate plans to pause or slow down its steep rate-hike stance. Although inflation has slowed lately, it is still at multi-year highs, which has made the bulls skittish and given hope to bears.

Given this situation, income-seeking investors should go for funds that have more exposure to stocks providing handsome dividends. Thus, funds like AB Global Risk Allocation Fund Class I (CABIX - Free Report) , Franklin High Income Fund Advisor Class (FVHIX - Free Report) and AB All Market Real Return Portfolio Class C (ACMTX - Free Report) are likely to benefit in the near term.

Fed Continues With Steep Rate Hikes

Markets have remained volatile almost throughout the year as soaring inflation has compelled the Fed to adopt a steep rate hike polity. This has seen the Fed go for a 75-basis point interest rate hike for the fourth consecutive time in its November policy meeting.

Investors had hoped for the Fed to go slow on its steep rate hikes after economic data showed that inflation might have peaked. Market participants had hoped that the steep interest rate increases would end with the rate hike in November.

Fed chair Jerome Powell also hinted that it is too premature to think about pausing its aggressive rate hikes. Instead, Powell said that the Fed would continue with its steep rate hike and that the central bank’s benchmark rate may require topping the level of core inflation to get complete control of surging inflation.

The Consumer Price Index (CPI) rose 7.7% year over year in October. Although inflation has eased lately after increasing 8.2% in September, it is far from the Fed’s target of 2%. Hence the Fed is likely to push its benchmark interest rate target above the 5% mark and then leave it there for a while for core inflation to come down to 2%.

Moreover, the bond markets have been turbulent this year ever since the Fed began making aggressive asset purchases to tighten its control monetary policy grip. As a result of this, markets have suffered since it has put investors on edge and growth stocks have suffered the most.

Top 3 Dividend Mutual Funds to Buy Now

Rising interest rates have raised fears of a global slowdown and may lead to further uncertainty in the coming days. Given this scenario, income-seeking investors should go for mutual funds that invest in dividend-paying equities to get the regular cash they need.

We have selected three such mutual funds that offer a goods dividend yield, have given impressive 3-year and 5-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 the 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).

AB Global Risk Allocation Fund Class I seeks high returns through a combination of current income and capital appreciation. CABIX invests principally in a diversified portfolio of equity and fixed-income securities such as common and preferred stocks, U.S. Government and agency obligations, bonds and senior debt securities. AB Global Risk Allocation Fund Class I’s 3-year and 5-year annualized returns are 4.6% and 3.7%, respectively. CABIX has a Zacks Mutual Fund Rank #1.

Franklin High Income Fund Advisor Class fund aims for high current income. FVHIX also aims for capital appreciation as much as possible, consistent with the fund's principal goal by investing primarily in high-yield, lower-rated debt securities. Franklin High Income Fund Advisor Class fund has a 3-year and 5-year annualized return of 0.6% and 2.1%, respectively. FVHIX has a Zacks Mutual Fund Rank #2.

AB All Market Real Return Portfolio Class C fund seeks to invest in a balance of asset types, like stocks, bonds, and cash, and including precious metals or commodities is not unusual. ACMTX’s 3-year and 5-year annualized returns are 5.9% and 3.6%, respectively. AB All Market Real Return Portfolio Class C fund has a Zacks Mutual Fund Rank #2.

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