Volatility has returned to Wall Street, with the post-election euphoria ebbing over the past week as fresh data showed inflation rising more than expected in November. The Federal Reserve’s two-day policy meeting will take place this week, with hopes building on another rate cut. However, concerns have grown over the Federal Reserve’s future rate cuts.

Given this situation, it would be ideal to invest in value funds like Northern Income Equity (NOIEX Quick QuoteNOIEX - Free Report) , T. Rowe Price Value (TRVLX Quick QuoteTRVLX - Free Report) and Dodge & Cox Stock I (DODGX Quick QuoteDODGX - Free Report) .

Inflation Jumps in November

The Commerce Department said last week that the consumer price index (CPI) climbed 0.3% sequentially in November, registering its biggest gain since April, after increasing 0.2% for four consecutive months. On a year-over-year basis, CPI rose 2.7%. Core CPI, which strips out the volatile food and energy costs, also rose 0.3% sequentially in November and 3.3% from the year-ago levels.

Both CPI and core CPI came in line with expectations. Several investors believe that inflation is still not that high, which has kept the optimism surrounding a 25-basis point rate cut in December intact. However, a large section fears that the Fed could slow its pace of rate cuts in 2025, given that inflation is still quite high from the Fed’s 2% target.

The Wall Street rally, which gathered pace following Donald Trump’s landmark win in the U.S. presidential election in November, saw all three major indexes hitting new all-time closing highs. However, the rally appears to have come to a halt.

On Monday, the Dow recorded its eighth straight day of losses. Last week, the Dow lost 1.8%, while the S&P 500 and the Nasdaq finished 0.6% and 0.3% lower, respectively. Investors are currently trying to gauge the Federal Reserve’s future rate cut plans. The Fed already indicated last month that although rate cuts will happen in 2025, the pace will be slower. Higher borrowing costs could make markets volatile for a longer period.

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).

Northern Income Equity 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 12% and 14.1%, 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.

T. Rowe Price Value fund seeks long-term capital appreciation. TRVLX invests at least 65% of total assets in common stocks that 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 9.2% and 12.7%, respectively. T. Rowe Price Value fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.69%, which is lower than its category average of 0.94%.

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

Dodge & Cox Stock I fund seeks long-term growth of principal and income. A secondary objective is to achieve a reasonable current income. DODGX invests primarily in a broadly diversified portfolio of common stocks.

DODGX’s 3-year and 5-year annualized returns are 12% and 14.2%, respectively. Dodge & Cox Stock I fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.51%, which is lower than its category average of 93%.

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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