4 low beta funds to counter growing market uncertainties
The major indices ended the week (ending September 10) in negative territory, with the Dow Jones closing lower for the second week in a row, down 2.2%. The S&P 500 closed in the red (1.7% lower for the week) throughout the week, its longest losing streak since February 22, while the Nasdaq was down 1.6% during the week. of the week.
Now, multiple factors are weighing on investor sentiment. One of the main factors is the coronavirus pandemic. The fear of the virus has become an obstacle for the American economy, which is trying by all means to bounce back. According to the New York Times tracker, as of September 10, the country had an average of just under 150,000 new cases per day, with only 53% of its population fully vaccinated.
President Joe Biden has issued a new set of additional vaccine warrants for federal workers. He also pushed the tenure of government contractors employees. According to the notice, a vaccination warrant has been placed for millions of federal government employees as well as the directive sent to the US Department of Labor. All private companies with 100 or more employees will be required to impose vaccination or request proof of a negative coronavirus test from employees, at least once a week.
Biden’s vaccine mandate is the result of the increase in the number of new cases due to the dominant strain of coronavirus, the Delta variant. In addition, the administration and the World Health Organization (WHO) are concerned about the Mu variant which originated in Colombia and has spread to some countries in South America and Europe. While new cases of the Mu variant remain significantly low, authorities fear the strain is highly resistant to vaccines (according to the study conducted in Japan, with minimal data available).
As the virus continues to pose a threat, investors are worried about the Federal Reserve’s decision to cut stimulus measures. The Federal Open Market Committee is scheduled to hold its two-day political meeting scheduled for September 21. The Fed will make decisions about cutting the $ 120 billion monthly bond buying program it initially launched during the pandemic to support the economic recovery. Investors were frightened on September 9 after the European Central Bank announced it would “moderate the pace” of net asset purchases under the emergency pandemic purchasing program.
Consumers, the backbone of the US economy, have also shown signs of distrust of the economic recovery trajectory. Earlier this month, the Conference Board reported that its consumer confidence index slipped to 113.8 for August, lower than the consensus estimate of 123.1. August’s drop now puts consumer confidence at its lowest level in six months and the Delta variant and soaring commodity prices remain the main concerns.
4 mutual funds to buy
Considering the current market scenario, it is advisable to invest in low beta mutual funds. Indeed, these funds are theoretically less volatile than the market. The stocks in the portfolio of these funds are comparatively less risky because they incorporate utility stocks that often have low betas (tend to move slower than market averages). These funds also invest in government bonds and debt securities.
Therefore, we have selected four low beta mutual funds that investors can choose from during market fluctuations. These mutual funds are ranked Zacks Mutual Fund Rank # 1 (strong buy) and have been showing encouraging returns since the start of the year (YTD). In addition, the minimum initial investment is $ 5,000. We expect these funds to outperform their peers in the future.
The question here is: why should investors consider mutual funds? The low transaction costs and portfolio diversification without multiple commission fees associated with stock purchases are the main reason to put money in mutual funds (learn more: Mutual funds: advantages, disadvantages and how they make money for investors).
Vanguard Ultra-Short-Term Bond Fund Investor Shares VUBFX aims to provide current income while maintaining limited price volatility. The fund invests in a diversified portfolio of high quality and, to a lesser extent, medium quality fixed income securities. VUBFX has a beta of 0.12 over three years.
This Zacks – Index sector has had a history of positive total returns for over 10 years. Specifically, the fund has generated a return of 2.3% and 1.8% over the past three and five years, respectively. To see how this fund has performed against its category and other ranked 1 and 2 mutual funds, please click here.
VUBFX has an annual expense ratio of 0.20% compared to the category average of 0.44%.
Fidelity Floating Rate High Income Fund FFRHX aims for a high level of current income. The fund invests at least 80% of its assets in floating rate loans, which are often lower quality debt securities, and other floating rate securities. FFRHX has a beta of 0.15 over three years.
This Zacks Sector – High Yield-Bonds product has a history of positive total returns for over 10 years. Specifically, the fund has generated returns of almost 4% and 4.4% over the past three and five years, respectively. To see how this fund has performed against its category and other ranked 1 and 2 mutual funds, please click here.
FFRHX has an annual expense ratio of 0.68% compared to the category average of 1.03%.
T. Rowe Price Very Short Term Bond Fund TRBUX aims for a high level of income compatible with minimal fluctuations in the value of capital and liquidity. The fund invests in a diversified portfolio of high quality short-term government and corporate securities. TRBUX has a beta of 0.18 over three years.
This Zacks Sector – Inv Grade Bond-Short product has a history of positive total returns for over 10 years. Specifically, the fund has generated a return of 2.5% and 2.2% over the past three and five years, respectively. To see how this fund has performed against its category and other ranked 1 and 2 mutual funds, please click here.
TRBUX has an annual expense ratio of 0.68% compared to the category average of 1.03%.
Vanguard Federal Short-Term Fund Investor Shares VSGBX aims for current income while maintaining limited price volatility. The fund invests at least 80% of its assets in short-term bonds issued or guaranteed by the US government and its agencies and bodies. VSGBX has a beta of 0.23 over three years.
This Zacks – Govt Bond-Short sector product has a history of positive total returns for over 10 years. Specifically, the fund has generated a return of 3.4% and 1.9% over the past three and five years, respectively. To see how this fund has performed against its category and other ranked 1 and 2 mutual funds, please click here.
VSGBX has an annual expense ratio of 0.20% compared to the category average of 0.64%.
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