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Trump's Renewed Tariff Threats Slam Markets 5 Low-Risk Funds
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All the three major bourses registered heavy losses last week following tensions over trade issues between the United States with China and the European Union (EU). Trade war jitters intensified after President Trump said that the trading partners of the United States will face strong actions if they do not remove trade barriers on the U.S.
Amid this turmoil, mutual funds that offer promising returns and bear a lower level of risk might be prudent investment options.
Looming Trade War Fears a Big Headwind for Investors
On Jun 1, the United States slapped tariffs of 25% on steel imports and 10% on aluminum imports from EU countries, citing “national security.” The EU did not shy away from taking "rebalancing measures,” as on Jun 20, the bloc said that starting Jun 22 a tariff of $3.2 billion will be imposed on U.S. imports.
Moreover, the United States has already imposed trade tariffs of $250 billion on Chinese imports and hinted at levying additional tariffs of $200 billion. China has retaliated with similar kind of tariffs on products imported from the United States. Following these developments, the S&P 500 and the Nasdaq a posted weekly decline of 0.9% and 0.3%, respectively. Also, the Dow ended 2% down, marking its biggest weekly drop since Mar 23.
On Jun 24, Trump said that the United States’ trading partners that have imposed “artificial Trade Barriers and Tariffs” on U.S. imports should get rid of those “Barriers & Tariffs.” He added that all these trading partners will face "more than reciprocity by the United States" if they do not remove their trade tariffs.
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 and three-year 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, municipalities and political subdivisions under the State of Colorado.
HICOX carries an expense ratio of 0.61% compared with the category average of 0.94%. Moreover, HICOX requires a minimal initial investment of $500. The fund has one-year and three-year returns of 5.8% and 4.7%, respectively.
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 2.52 for the last three years.
Performance Trust Strategic Bond (PTIAX - Free Report) invests a substantial portion of its assets in fixed-income instruments including municipal, government and corporate bonds, mortgage-backed and asset-backed securities. These fixed-income securities are issued by different U.S. municipal, government and private-sector entities.
PTIAX carries an expense ratio of 0.77% compared with the category average of 1.02%. Moreover, PTIAX requires a minimal initial investment of $2,500. The fund has one-year and three-year returns of 3.1% and 4.7%, respectively.
The fund has a Zacks Mutual Fund Rank #1. Further, Anthony J. Harris is one of the fund managers of PTIAX since 2010. PTIAX has a Sharpe ratio of 1.87 for the last three years.
Putnam Global Technology Y (PGTYX - Free Report) seeks appreciation of capital. PGTYX invests a large chunk of its assets in securities of companies involved in operations related to the technology domain. PGTYX primarily invests in securities of large- and mid-cap companies that fund manager considers as having strong growth potential.
PGTYX carries an expense ratio of 1.03% compared with the category average of 1.46%. Moreover, PGTYX requires a minimal initial investment of $0. The fund has one-year and three-year returns of 33.8% and 26.2%, respectively.
The fund has a Zacks Mutual Fund Rank #2. Further, Di Yao is one of the fund managers of PGTYX since 2012. PGTYX has a Sharpe ratio of 1.80 for the last three years.
Columbia Global Technology Growth Fund A (CTCAX - Free Report) invests a bulk of its assets in common stocks, preferred stocks and securities that are convertible into preferred or common stocks. These equity securities are issued by technology companies that will benefit from technological advancements or improvements.
CTCAX carries an expense ratio of 1.31% compared with the category average of 1.46%. Moreover, CTCAX requires a minimal initial investment of $2,000. The fund has one-year and three-year returns of 30% and 22.6%, respectively.
The fund has a Zacks Mutual Fund Rank #1. Further, Rahul Narang is the fund manager of CTCAX since 2012. CTCAX has a Sharpe ratio of 1.62 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 lower maturity period.
TRBUX carries an expense ratio of 0.35% compared with the category average of 0.48%. Moreover, TRBUX requires a minimal initial investment of $2,500. The fund has one-year and three-year returns of 1.7% and 1.5%, respectively.
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 1.9 for the last three years.
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Trump's Renewed Tariff Threats Slam Markets 5 Low-Risk Funds
All the three major bourses registered heavy losses last week following tensions over trade issues between the United States with China and the European Union (EU). Trade war jitters intensified after President Trump said that the trading partners of the United States will face strong actions if they do not remove trade barriers on the U.S.
Amid this turmoil, mutual funds that offer promising returns and bear a lower level of risk might be prudent investment options.
Looming Trade War Fears a Big Headwind for Investors
On Jun 1, the United States slapped tariffs of 25% on steel imports and 10% on aluminum imports from EU countries, citing “national security.” The EU did not shy away from taking "rebalancing measures,” as on Jun 20, the bloc said that starting Jun 22 a tariff of $3.2 billion will be imposed on U.S. imports.
Moreover, the United States has already imposed trade tariffs of $250 billion on Chinese imports and hinted at levying additional tariffs of $200 billion. China has retaliated with similar kind of tariffs on products imported from the United States. Following these developments, the S&P 500 and the Nasdaq a posted weekly decline of 0.9% and 0.3%, respectively. Also, the Dow ended 2% down, marking its biggest weekly drop since Mar 23.
On Jun 24, Trump said that the United States’ trading partners that have imposed “artificial Trade Barriers and Tariffs” on U.S. imports should get rid of those “Barriers & Tariffs.” He added that all these trading partners will face "more than reciprocity by the United States" if they do not remove their trade tariffs.
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 and three-year 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, municipalities and political subdivisions under the State of Colorado.
HICOX carries an expense ratio of 0.61% compared with the category average of 0.94%. Moreover, HICOX requires a minimal initial investment of $500. The fund has one-year and three-year returns of 5.8% and 4.7%, respectively.
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 2.52 for the last three years.
Performance Trust Strategic Bond (PTIAX - Free Report) invests a substantial portion of its assets in fixed-income instruments including municipal, government and corporate bonds, mortgage-backed and asset-backed securities. These fixed-income securities are issued by different U.S. municipal, government and private-sector entities.
PTIAX carries an expense ratio of 0.77% compared with the category average of 1.02%. Moreover, PTIAX requires a minimal initial investment of $2,500. The fund has one-year and three-year returns of 3.1% and 4.7%, respectively.
The fund has a Zacks Mutual Fund Rank #1. Further, Anthony J. Harris is one of the fund managers of PTIAX since 2010. PTIAX has a Sharpe ratio of 1.87 for the last three years.
Putnam Global Technology Y (PGTYX - Free Report) seeks appreciation of capital. PGTYX invests a large chunk of its assets in securities of companies involved in operations related to the technology domain. PGTYX primarily invests in securities of large- and mid-cap companies that fund manager considers as having strong growth potential.
PGTYX carries an expense ratio of 1.03% compared with the category average of 1.46%. Moreover, PGTYX requires a minimal initial investment of $0. The fund has one-year and three-year returns of 33.8% and 26.2%, respectively.
The fund has a Zacks Mutual Fund Rank #2. Further, Di Yao is one of the fund managers of PGTYX since 2012. PGTYX has a Sharpe ratio of 1.80 for the last three years.
Columbia Global Technology Growth Fund A (CTCAX - Free Report) invests a bulk of its assets in common stocks, preferred stocks and securities that are convertible into preferred or common stocks. These equity securities are issued by technology companies that will benefit from technological advancements or improvements.
CTCAX carries an expense ratio of 1.31% compared with the category average of 1.46%. Moreover, CTCAX requires a minimal initial investment of $2,000. The fund has one-year and three-year returns of 30% and 22.6%, respectively.
The fund has a Zacks Mutual Fund Rank #1. Further, Rahul Narang is the fund manager of CTCAX since 2012. CTCAX has a Sharpe ratio of 1.62 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 lower maturity period.
TRBUX carries an expense ratio of 0.35% compared with the category average of 0.48%. Moreover, TRBUX requires a minimal initial investment of $2,500. The fund has one-year and three-year returns of 1.7% and 1.5%, respectively.
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 1.9 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 >>