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3 Dividend Mutual Funds to Ride Coronavirus Fears

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The impact of the novel coronavirus on economies around the world has been no less than catastrophic. In the United States, major market indexes took a steep plunge in recent weeks and the downturn is likely to persist with the number of COVID-19 cases in the country climbing on a daily basis.

This is why it is prudent for fund investors to turn their attention right now to mutual funds that offer dividends. After all, these investments provide steady and reliable payouts, which are necessary in the current market scenario. 

Coronavirus Mayhem in U.S. Markets

The U.S. financial markets have been rattled much by the new pandemic, especially industries such as tourism incurring huge losses. Earlier this week, per The World Travel and Tourism Council (WTTC), up to 50 million jobs could be lost because of the pandemic.

Per BBC, the news followed thousands of flight cancellations globally and some insurance firms’ temporary suspension of travel insurance for new customers. In fact, the American travel and tourism industry could lose at least $24 billion in foreign spending in 2020 because of the fast-spreading disease, CNBC cited.

After all, as of Mar 13, the number of coronavirus cases exceeded 130,000 and the number of deceased crossed 4900 globally. While biotech firms are actively engaged in formulating a vaccine to counter the virus, investors are understandably wary of investing in equities and other assets.

On Mar 13, the Federal Reserve announced that it will initiate measures to increase liquidity in light of the sell-off, which comprises a possible injection of worth more than $1.5 trillion capital into the market over the next two days. Although Wall Street immediately responded to this news in midday Thursday, the indexes dropped 8% anyway.

Dividend mutual funds are ideal for a scenario such as this. The funds are not only less risky than mutual funds that invest in equities but also have an income-generating nature, both of which provide a cushion in turbulent times.

3 Funds to Buy

We have, therefore, selected three mutual funds that pay decent dividends. All of these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy). In addition, the minimum initial investment for these funds is within $5,000.

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.

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).

Payden High Income Fund Investor Class (PYHRX - Free Report) seeks to provide investors with high current income and capital growth. The fund does so by primarily investing its assets in a diversified portfolio of below investment grade bonds. PYHRX invests in a wide range of debt instruments and income-producing securities.

This Zacks sector – High Yield-Bonds has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

PYHRX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.63%, which is below the category average of 1.02%. It has returned 11.4% over a year. The fund has a minimum initial investment of $5000.

Fidelity Capital & Income Fund (FAGIX - Free Report) seeks to offer income and capital growth. The fund may invest a majority of its assets in equity and debt securities, which may comprise of defaulted securities. The fund, which invests in U.S. and non-U.S. issuers alike, invests in companies that may not be in a good financial condition.

This Zacks sector – High Yield-Bonds has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FAGIX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.69%, which is below the category average of 1.02%. It has returned 10.8% over a year. The fund has no minimum initial investment.

ClearBridge Dividend Strategy Fund Class 1 (LCBOX - Free Report) aims for dividend income and increasing that income along with long-term capital growth. The fund invests the majority of its assets in equity securities or other investments with similar economic characteristics that offer dividends or are expected to kick off their dividends over time. LCBOX may invest more than half of its assets in equity securities of foreign issuers, either directly or through depositary receipts.

This Zacks sector – Allocation Balanced has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

LCBOX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.77%, which is below the category average of 0.94%. It has returned 21.6% over a year. The fund has no minimum initial investment.

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