Investors have adopted a cautious approach due to domestic macroeconomic conditions. The Federal Reserve, after its last monetary policy meeting, announced a pause in interest rate cuts to gauge the impact of the Trump administration’s fiscal policies. Concerns also remain over the impact of the trade war between the United States and China — the world’s top two economies. Rising inflation, along with such uncertainty, could slow down the Fed’s rate cut plans. 

The personal consumption expenditure (PCE) index, Fed’s preferred inflation gauge, rose 2.6% in December against 2.4% in November, in line with market expectations. U.S. gross domestic product (GDP) decelerated in Q4. Growth for the full year came in at 2.8% in 2024 versus 2.9% in 2023. Analysts are expecting economic growth to stay flat in the second half and inflation to rise. 

Thus, investors who seek higher returns than large-cap funds but less volatility than the small-cap ones can opt for mid-cap mutual funds like T. Rowe Price Mid-Cap Value (TRMCX Quick QuoteTRMCX - Free Report) , Vanguard Selected Value (VASVX Quick QuoteVASVX - Free Report) and Fidelity Value (FDVLX Quick QuoteFDVLX - Free Report) as their major holdingsto achieve their investment objective.

These funds have the majority of their investments in sectors such as technology, finance, consumer durables and industrial cyclical, which will help investors in long-term growth and preservation of wealth.

Why Invest in Mid-Cap Value Mutual Funds?

Mid-cap value mutual funds provide excellent opportunities to seek returns with lesser risk by gaining exposure to stocks that are available at a discounted price. While large companies are normally known for stability and the smaller ones for growth, mid-caps offer growth and stability simultaneously. Companies with market capitalization between $2 billion and $10 billion are generally considered mid cap.

Value mutual funds are those that invest in stocks trading at discounts to book value and have a low price-to-earnings ratio along with high dividend yields. Value investing is always a coveted strategy, and for a good reason. After all, who doesn’t want to add stocks that have low PEs, a solid outlook and decent dividends? However, not all value funds solely comprise companies that primarily use their earnings to pay out dividends. Investors interested in choosing value funds for yield, should surely check the mutual fund yield.

We have thus selected three mid-cap value mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy), have positive three-year and five-year annualized returns and minimum initial investments within $5000, and carry an expense ratio of less than 1%. Notably, mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

T. Rowe Price Mid-Cap Value fund invests most of its assets along with borrowings, if any, in equity securities of companies with market capitalization within the range of the companies listed on either the S&P MidCap 400 Index or the Russell Midcap Value Index at the time of purchase.

Vincent Michael DeAugustino has been the lead manager of TRMCX since May 1, 2022. Most of the fund’s exposure is in companies like Corning (3.1%), Select Medical Holdings (2.1%) and Kenvue (2.1%) as of Sept. 30, 2024.

TRMCX has three-year and five-year annualized returns of 9.8% and 12.6%, respectively. The annual expense ratio of TRMCX is 0.79%.

To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Vanguard Selected Value fund invests most of its net assets in mid-cap domestic companies, which, according to the advisor, are undervalued. VASVX advisors consider a stock as undervalued if it is out of favor among investors, trading at a price below average in relation to measures estimated such as earnings and book value, and has an above-average dividend yield.

Richard L. Greenberg has been the lead manager of VASVX since Feb. 24, 2005. Most of the fund’s investments were in companies like Aercap Holdings (3%), Gildan Activewear (1.8%) and Fidelity National Financial (1.8%) as of July 31, 2024.

VASVXhas three-year and five-year annualized returns of 7.5% and 11%, respectively. VASVX has an annual expense ratio of 0.43%. 

Fidelity Value fund invests in common stocks of medium-sized companies that possess fixed assets or are undervalued with respect to factors such as assets, earnings or growth potential based on the research of Fidelity Management & Research Company LLC (FMR). FDVLX advisors preferably invest in medium-sized companies of domestic or foreign issues.

Matthew Friedman has been the lead manager of FDVLX since May 12, 2010, and most of the fund’s investments are in companies like PG&E (1.3%), Vistra (1.2%) and Ventas (1%) as of Oct. 31, 2024.

FDVLX has three-year and five-year annualized returns of 6.3% and 12.2%, respectively. FDVLX has an annual expense ratio of 0.84%.

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