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3 Funds to Add to Your Portfolio Amid Sinking Consumer Confidence
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Americans appear to have lost some confidence lately. The Conference Board said on Feb 27 that the consumer confidence index unexpectedly fell to 106.7 in the month after three straight months of increases.
Economists had expected consumer confidence to reach 115 in February after a reading of 110.9 in January, a two-year high. However, the sudden decline in February came amid growing concerns over the economy’s health.
Consumers' expectations of inflation declined to 5.2%, hitting its lowest level since March 2020, after falling to 5.3% in January. However, inflation rose in January. The consumer price index (CPI) increased 3.1% year over year in January and 0.3% sequentially.
Core CPI, which excludes the volatile energy and food costs, rose 3.7% year over year in January.
The Federal Reserve earlier said that it is unlikely that the central bank would be ready for the first rate cut in March as inflation remains above its 2% target. Rising inflation has further dimmed hopes of a rate cut anytime soon.
Also, the minutes of the Federal Reserve’s last FOMC meeting suggest that officials would be ready for a rate cut only after they are confident that inflation has cooled further. Market participants are now expecting the first rate cut to get delayed till June.
Higher interest rates increase borrowing costs, which may keep markets volatile for a longer period.
Given the situation, a savvy investor might consider investing in large-cap value funds as a strategy to manage risks. Large-cap stocks, recognized for their historical stability, are generally perceived as more dependable compared to mid- or small-cap stocks.
Also, value funds, comprising stocks typically priced below fundamental metrics like earnings, book value and debt-to-equity ratios, while offering dividend payments, offer an appealing option for investors seeking lucrative investment opportunities.
3 Best Choices
We've identified three such large-cap value mutual funds that have demonstrated impressive annualized returns over both 3-year and 5-year periods. These funds also hold a Zacks Mutual Fund Rank of #1 (Strong Buy), require an initial investment of no more than $5,000, and have a low expense ratio.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Shelton Equity Income Investor (EQTIX - Free Report) fund seeks to achieve a high level of income and capital appreciation by investing primarily in income-producing U.S. equity securities. EQTIX invests primarily in securities, which generate a relatively high level of dividend income and have the potential for capital appreciation. Shelton Equity Income Investor fund also invests at least 80% of its total assets in stocks.
EQTIX’s 3-year and 5-year annualized returns are 10.4% and 10.7%, respectively. Shelton Equity Income Investor fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.69%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Northern Income Equity (NOIEX - Free Report) fund seeks to provide a high level of current income with long-term capital appreciation as a secondary objective. NOIEX’s approach is to identify the securities of companies that generate high current yields and offer prospects for growth and possible capital appreciation. In pursuing its objective, the Northern Income Equity fund invests at least 65% of its total assets in a mix of income-producing equity securities, with no limit on the fund's ability to invest in non-investment grade fixed income and convertible debt securities.
NOIEX’s 3-year and 5-year annualized returns are 10.7% and 12.1%, respectively. Northern Income Equity fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.49%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Putnam Large Cap Value A (PEYAX - Free Report) fund seeks current income. Capital growth is a secondary objective when consistent with seeking current income. PEYAX invests mainly in common stocks of U.S. companies, with a focus on value stocks that offer the potential for current income and also for capital growth.
PEYAX’s 3-year and 5-year annualized returns are 12.9% and 13%, respectively. Putnam Large Cap Value A fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.90%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
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3 Funds to Add to Your Portfolio Amid Sinking Consumer Confidence
Americans appear to have lost some confidence lately. The Conference Board said on Feb 27 that the consumer confidence index unexpectedly fell to 106.7 in the month after three straight months of increases.
Economists had expected consumer confidence to reach 115 in February after a reading of 110.9 in January, a two-year high. However, the sudden decline in February came amid growing concerns over the economy’s health.
Consumers' expectations of inflation declined to 5.2%, hitting its lowest level since March 2020, after falling to 5.3% in January. However, inflation rose in January. The consumer price index (CPI) increased 3.1% year over year in January and 0.3% sequentially.
Core CPI, which excludes the volatile energy and food costs, rose 3.7% year over year in January.
The Federal Reserve earlier said that it is unlikely that the central bank would be ready for the first rate cut in March as inflation remains above its 2% target. Rising inflation has further dimmed hopes of a rate cut anytime soon.
Also, the minutes of the Federal Reserve’s last FOMC meeting suggest that officials would be ready for a rate cut only after they are confident that inflation has cooled further. Market participants are now expecting the first rate cut to get delayed till June.
Higher interest rates increase borrowing costs, which may keep markets volatile for a longer period.
Given the situation, a savvy investor might consider investing in large-cap value funds as a strategy to manage risks. Large-cap stocks, recognized for their historical stability, are generally perceived as more dependable compared to mid- or small-cap stocks.
Also, value funds, comprising stocks typically priced below fundamental metrics like earnings, book value and debt-to-equity ratios, while offering dividend payments, offer an appealing option for investors seeking lucrative investment opportunities.
3 Best Choices
We've identified three such large-cap value mutual funds that have demonstrated impressive annualized returns over both 3-year and 5-year periods. These funds also hold a Zacks Mutual Fund Rank of #1 (Strong Buy), require an initial investment of no more than $5,000, and have a low expense ratio.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Shelton Equity Income Investor (EQTIX - Free Report) fund seeks to achieve a high level of income and capital appreciation by investing primarily in income-producing U.S. equity securities. EQTIX invests primarily in securities, which generate a relatively high level of dividend income and have the potential for capital appreciation. Shelton Equity Income Investor fund also invests at least 80% of its total assets in stocks.
EQTIX’s 3-year and 5-year annualized returns are 10.4% and 10.7%, respectively. Shelton Equity Income Investor fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.69%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Northern Income Equity (NOIEX - Free Report) fund seeks to provide a high level of current income with long-term capital appreciation as a secondary objective. NOIEX’s approach is to identify the securities of companies that generate high current yields and offer prospects for growth and possible capital appreciation. In pursuing its objective, the Northern Income Equity fund invests at least 65% of its total assets in a mix of income-producing equity securities, with no limit on the fund's ability to invest in non-investment grade fixed income and convertible debt securities.
NOIEX’s 3-year and 5-year annualized returns are 10.7% and 12.1%, respectively. Northern Income Equity fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.49%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Putnam Large Cap Value A (PEYAX - Free Report) fund seeks current income. Capital growth is a secondary objective when consistent with seeking current income. PEYAX invests mainly in common stocks of U.S. companies, with a focus on value stocks that offer the potential for current income and also for capital growth.
PEYAX’s 3-year and 5-year annualized returns are 12.9% and 13%, respectively. Putnam Large Cap Value A fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.90%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
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 >>