Investor sentiment is clouded due to stronger-than-expected service sector data since February that has triggered fresh inflation worries. The Institute for Supply Management (ISM) on Sep 7 said that the non-manufacturing Purchasing Managers' Index for the month of August rose to 54.5% from 52.7% in July. Such numbers would impact inflation for the month of August, leaving less room for the Federal Reserve to make a favorable interest rate decision for the markets, in its upcoming September meet.

Reports from the U.S. Labor Department show Americans filing for unemployment is the lowest since February for the week ended Sep 2. State unemployment benefits fell 13,000 to 216,000, marking the fourth straight weekly decline. This number suggests that the labor market is still tight. Federal Reserve Chairman Jerome Powell’s, Jackson Hole speech, made it clear that the Fed will continue with the monetary tightening measures it required to keep inflation under checkand achieve its 2% target over the long term.

Amid such torrid times, it is prudent for investors to take refuge in mutual funds having large-cap value companies as their major holdings. Large-cap stocks are better choices than small or mid-cap stocks for risk-averse investors. Large-cap stocks have a long-term performance history and are more stable compared to mid or small caps. Companies with a market capitalization of more than $10 billion are generally considered large caps.

Moreover, since the broader market is primarily on a downslide, investors should look for stocks that tend to trade at a price lower than their fundamentals. Thus, investors should choose value stocks as they are expected to outperform growth ones once the market begins to recoup from the current downtrend.

We have thus selected three large-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 a low expense ratio compared to the category average of 0.94%. 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).

BNY Mellon Dynamic Value Fund (DRGVX Quick QuoteDRGVX - Free Report) invests most of its assets along with borrowings, if any, in stocks of companies that have value, sound business fundamentals, and positive business momentum evaluated based on extensive quantitative and fundamental research by the portfolio manager. DRGVX also invests a small portion of its net assets in foreign equity securities with similar economic features.

Keith Howell Jr. has been the lead manager of DRGVX since Sep 21, 2021. Most of the fund’s exposure is in companies like Berkshire Hathaway (4.4%), JPMorgan Chase (4.3%) and Exxon Mobil (3.7%) as of 5/31/2023.

DRGVX’s three-year and five-year annualized returns are 22.4% and 11.3%, respectively. DRGVX has an annual expense ratio of 0.68%, which is less than the category average of 0.94%.

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

Invesco Comstock Fund (ACSDX Quick QuoteACSDX - Free Report) invests most of its assets along with borrowings, if any, incommon stocks, derivatives and other instruments with similar economic characteristics, preferably in issues of large-cap companies. ACSDX advisors also invest a smaller portion of their net assets in real estate investment trusts.

Kevin C. Holt has been the lead manager of ACSDX since Jul 31, 1999. Most of the fund’s exposure is in companies like Philip Morris International (2.8%), Chevron (2.6%) and Meta Platform (2.5%) as of 4/30/2023.

ACSDX’s three-year and five-year annualized returns are 21.7% and 9.3%, respectively. ACSDX has an annual expense ratio of 0.56%.

Vanguard Windsor Fund (VWNDX Quick QuoteVWNDX - Free Report) invests primarily in large and mid-cap companies, which, according to the fund’s advisors, are undervalued. VWNDX advisors consider undervalued stocks that are out of favor amongst investors and are trading at prices below average earnings and book value.

Richard S. Pzena has been the lead manager of VWNDX since Aug 1, 2012. Most of the fund’s exposure is in companies like Pfizer (2.2%), Edison International (2.0%) and Westinghouse Air Brake (2.0%) as of 10/31/2022.

VWNDX’s three-year and five-year annualized returns are 19.8% and 10.6%, respectively. VWNDX has an annual expense ratio of 0.42%.

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