Inflation inched up in August, just at a time when optimism is high that the Fed might finally end its interest rate hike campaign. The consumer price index (CPI) reading for August increased 0.6% on a monthly basis, higher than July’s rise of 0.2%.

Year over year, CPI rose 3.7% in August, higher than the expectations of a rise of 3.6%. This is also the first time since February 2022 that CPI has increased more than 0.6% month over month.

Core CPI, which excludes the volatile energy and food prices, climbed 0.3%, higher than the consensus estimate of a rise of 0.2%. On a year-over-year basis, CPI jumped 4.3%.

The jump in inflation seen in August was largely driven by the continuous increase in oil prices. During that month, energy costs increased 5.6%, with gasoline prices experiencing a substantial 10.6% rise, while food prices saw a more modest 0.2% increase.

Oil prices have been increasing globally in recent times, primarily because major oil-producing countries like Saudi Arabia and Russia have opted to extend supply cuts until December 2023.

This surge in oil prices resulted in higher transportation costs, subsequently impacting the prices of necessary goods and services. This marked a 4.9% increase in airfares in August.

The rise in inflation in August was expected. However, inflation has also sharply declined over the past 12 years as the Fed maintained its monetary tightening cycle and increased interest rates by 525 basis points since March 2022.

However, inflation remains elevated and the recent rise may prompt the central bank to continue interest rate hikes.

An astute investor may thus consider investing in large-cap value funds to reduce risk. Large-cap stocks have a well-established history of success and are generally more dependable than mid- or small-cap stocks.

Additionally, value funds, which consist of stocks typically trading below their fundamental metrics like earnings, book value and debt-to-equity ratios while offering dividend payments, are favored by investors seeking promising investment opportunities.

3 Best Choices

We've identified three large-cap value mutual funds that have demonstrated impressive annualized returns over both 3-year and 5-year periods. These funds also hold a Zacks Mutual Fund Rank of #1 (Strong Buy), require an initial investment of no more than $5,000 and have a low expense ratio.

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).

Parnassus Core Equity Investor (PRBLX Quick QuotePRBLX - Free Report) fund seeks current income and capital appreciation. PRBLX invests at least 80% of its total assets in equity shares that pay dividends or interests and up to 20% of its total assets are invested in non-dividend equity securities.

PRBLX’s 3-year and 5-year annualized returns are 10.1% and 11.9%, respectively. Parnassus Core Equity Investor fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.61%, which is below the category average of 0.84%.

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

Shelton Equity Income Fund (EQTIX Quick QuoteEQTIX - Free Report) seeks to achieve a high level of income and capital appreciation by investing primarily in income-producing U.S. equity securities. EQTIX invests primarily in securities, which generate a relatively high level of dividend income and have the potential for capital appreciation. Shelton Equity Income Fund also invests at least 80% of its total assets in stocks.

EQTIX’s 3-year and 5-year annualized returns are 10.6% and 7.5%, respectively. Shelton Equity Income Fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.72%, which is below the category average of 1.11%.

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

TIAA-CREF Large Cap Value Fund (TCLCX Quick QuoteTCLCX - Free Report) invests the majority of its assets in bonds, including different types of fixed-income securities. The fund’s portfolio is divided into two segments. The first segment holds more than 70% of TCLCX’s assets that are invested in a wide variety of fixed-income securities and investment-grade bonds. The second segment has around 30% of its assets invested in fixed-income debt securities with special qualities.

TIAA-CREF Large Cap Value Fund has 3-year and 5-year annualized returns of 13% and 6.9%, respectively. TCLCX’s annual expense ratio of 0.66% is lower than the category average of 0.94%. TCLCX has a Zacks Mutual Fund Rank #1.

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

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