Inflation eased in April but remains sharply higher than the Federal Reserve’s 2% target. Economic growth is slowing and uncertainty over the timing of rate cuts has been worrying investors for quite some time.

Amid all these, Wall Street had a solid first quarter, with all three major indexes — the Dow, the S&P 500 and the Nasdaq — hitting all-time highs. The rally took a brief pause in April before starting May on a high.

However, volatility has returned to Wall Street once again and stocks are struggling. Last week, the Dow, the S&P 500 and the Nasdaq ended 0.9%, 0.5% and 1.1% lower, respectively.

Inflation has been a major cause of concern. The consumer price index (CPI) index increased 3.4% in April on a year-over-year basis and 0.3% sequentially, which was marginally lower than the consensus estimate of a rise of 0.4%.

The personal consumption expenditure (PCE) index, the Fed’s preferred inflation gauge rose 0.3% in April on a month-over-month basis, in line with the consensus estimate and unchanged from March's increase.

Core PCE, which excludes the volatile food and energy prices, rose 0.2% month over month, a decrease from the 0.3% jump in March and the consensus estimate for a repeat increase.

PCE increased by 2.7% year over year, in line with March's jump and economists’ expectations. Core PCE rose by 2.8% year over year.

However, the Federal Reserve hasn’t given any clear hint of the timing of the first rate cut. Moreover, the minutes of the Federal Reserve’s latest FOMC meeting revealed that several officials are in favor of rate hikes if inflation doesn’t decline sharply soon.

This has further raised concerns over the economy’s future and has been keeping markets volatile.

In this situation, an astute investor might choose to invest in large-cap value funds to reduce risks. Historically, large-cap funds have demonstrated stability and are generally considered more dependable compared to mid- or small-cap funds.

Value funds, which typically consist of stocks priced below fundamental metrics such as earnings, book value, and debt-to-equity ratios, often offer dividends and present appealing opportunities for profitable investments.

By investing in large-cap value funds, investors can capitalize on the stability of large-cap stocks, while leveraging the growth and income potential inherent in value-oriented investments.

3 Best Choices

We've identified three large-cap value mutual funds that have demonstrated impressive annualized returns over 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).

Homestead Value (HOVLX Quick QuoteHOVLX - Free Report) fund seeks capital growth over the long term and, secondarily, income. Under ordinary conditions, HOVLX invests at least 80% of its total assets in common stocks of established companies.

HOVLX’s 3-year and 5-year annualized returns are 7.5% and 11.4%, respectively. Homestead Valuefund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.64%.

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

T. Rowe Price Value (TRVLX Quick QuoteTRVLX - Free Report) fund seeks long-term capital appreciation. TRVLX invests at least 65% of total assets in common stocks the portfolio manager regards as undervalued. T. Rowe Price Value fund’s stock holdings consist primarily of large-company issues but also include smaller companies.

TRVLX’s 3-year and 5-year annualized returns are 6% and 11%, respectively. T. Rowe Price Value fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.71%.

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

Northern Income Equity (NOIEX Quick QuoteNOIEX - Free Report) fund seeks to provide a high level of current income with long-term capital appreciation as a secondary objective. NOIEX’s approach is to identify the securities of companies that generate high current yields and offer prospects for growth and possible capital appreciation. In pursuing its objective, the Northern Income Equity fund invests at least 65% of its total assets in a mix of income-producing equity securities, with no limit on the fund's ability to invest in non-investment grade fixed income and convertible debt securities.

NOIEX’s 3-year and 5-year annualized returns are 8.1% and 11.1%, respectively. Northern Income Equity fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.49%.

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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