Major U.S. indexes like the Dow, the S&P 500 and the tech-heavy Nasdaq have managed to stay positive with 1.1%, 5.8% and 4% gains, respectively, over the year-to-date period. Investors are concerned about domestic inflation, which rose for the third straight month in March and geopolitical tensions surrounding Israel and its neighbors.

After a gradual decline last year, the Consumer Price Index (CPI), for the month of March rose to 3.5% year on year against 3.2% in February. Such a big rise in CPI is mostly due to an increase in the cost of gasoline and shelter. However, Producer Price Index (PPI) increased 0.2% in March on a seasonally adjusted basis after rising 0.6% in February.

Since the rate of inflation, which is the decisive factor for future interest rate, is above the Federal Reserve’s ambitious target of 2%, concerns are rife over when the central bank will ease the overnight interest rate. However, Fed Chairman Jerome Powell hinted at three rate cuts in 2024 despite sticky inflation. The central bank, in its March meeting, has kept the overnight interest rate unchanged at its current range of 5.25-5.5%.

The Fed wants to cool off demand by making borrowing money more expensive to counter inflation. High interest rates impact corporate performance and, thereby, stock prices. However, the challenge remains for the Fed to create a soft landing for the economy by striking the right balance between inflation and growth by keeping the interest rate higher for longer.

Amid such a prolonged high interest rate situation that American individuals and businesses and not familiar with, investors can still consider mid-cap value mutual funds that provide excellent opportunities for those who seek returns with lesser risk by gaining exposure to mid-cap stocks that are available at a discounted price or are undervalued.

While large companies are normally known for stability and the smaller ones for growth, mid-caps offer growth and stability simultaneously. Companies with market capitalization between $2 billion and $10 billion are generally considered mid-cap companies. These funds have the majority of their investments in sectors such as technology, finance, health, consumer durables and industrial cyclical, which will help investors in long-term growth and preservation of wealth.

Mutual funds, in general, reduce transaction costs and diversify their portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

We have, thus, selected four mid-cap value mutual funds that have given impressive 3-year and 5-year annualized returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio of less than 1%.

T. Rowe Price Mid-Cap Value (TRMCX Quick QuoteTRMCX - Free Report) fund invests most of its assets along with borrowings, if any, in equity securities of companies with market capitalization within the range of companies listed on either the S&P MidCap 400 Index or the Russell Midcap Value Index at the time of purchase.

Vincent Michael DeAugustino has been the lead manager of TRMCX since Apr 30, 2022. Most of the fund’s exposure is in companies like Western Digital (3.2%), MKS Instruments (2.3%), and Stanley Black & Decker (2.3%) as of Dec 31, 2023.

TRMCX has three-year and five-year annualized returns of 11.3% and 13.3%, respectively. The annual expense ratio of TRMCX is 0.80%.

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

Vanguard Selected Value (VASVX Quick QuoteVASVX - Free Report) fund invests most of its net assets in mid-cap domestic companies, which, according to the advisor, are undervalued. VASVX advisors consider a stock as undervalued if it is out of favor among investors, trading at a price below average in relation to measures estimated such as earnings and book value, and has an above-average dividend yield.

Richard L. Greenberg has been the lead manager of VASVX since Feb 24, 2005. Most of the fund’s investments were in companies like Aercap Holdings (3.7%), Globe Life (2%) and Acuity Brands (1.7%) as of Oct 31, 2023.

VASVX has three-year and five-year annualized returns of 11.3% and 14.2%, respectively. VASVX has an annual expense ratio of 0.43%. 

Fidelity Value (FDVLX Quick QuoteFDVLX - Free Report) fund invests in common stocks of medium-sized companies that possess fixed assets or are undervalued with respect to factors such as assets, earnings or growth potential based on the research of Fidelity Management & Research Company LLC (FMR). FDVLX advisors preferably invest in medium-sized companies of domestic or foreign issues.

Matthew Friedman has been the lead manager of FDVLX since May 12, 2010, and most of the fund’s investments are in companies like Constellation Energy (1.3%), Global Payments (1.2%) and PG&E (1.1%) as of Jan 31, 2024.

FDVLX has three-year and five-year annualized returns of 10.8% and 14.8%, respectively. FDVLX has an annual expense ratio of 0.87%.

Allspring Special Mid Cap Value (WFPRX Quick QuoteWFPRX - Free Report) fund invests most of its net assets principally in equity securities of mid-cap companies. WFPRX advisors consider mid-cap companies as those with market capitalization falls within the range of companies listed on Russell Midcap Index at the time of purchase.

James M. Tringas has been the lead manager of WFPRX since Mar 25, 2009, and most of the fund’s investments are in companies like Republic Services (3.8%), Aercap Hldings (3.6%) and Carlisle Companies (3.5%) as of Dec 31, 2023.

WFPRX has three-year and five-year annualized returns of 9.8% and 12.2%, respectively. WFPRX has an annual expense ratio of 0.70%.

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