3 Large-Cap Value Mutual Funds to Buy for 2025 & Beyond - Understanding Null Hypothesis in Financial Analysis

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Major U.S. indexes like the Dow, the S&P 500 and the tech-heavy Nasdaq have returned 12.3%, 23% and 29.1%, respectively, so far this year. The Federal Reserve, in its December meeting, slashed the key interest rate by 25 basis points, in line with market expectations, thereby easing the interest rate burden on citizens and corporations. However, investors are concerned about the U.S.-China trade war and mixed economic data.

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As inflation is in an acceptable range, the Fed reduced interest rates for the third time before the end of 2024 to support a weakening labor market and stimulate economic growth. The Fed projected two rate cuts next year. Currently, the overnight borrowing rate is in the range of 4.25-4.5%, a level last seen in December 2022.

The consumer price index (CPI) accelerated for the second straight month in November by 0.3%, the steepest gain in the last seven months. On a year-over-year basis, CPI rose 3.3% compared with a 2.6% rise in October. The labor market is showing signs of cooling as the unemployment rate rose to 4.2%. According to Labour Department data the number of Americans filing for unemployment benefits rose unexpectedly at the end of November compared to the beginning of the year.

Investors are hopeful that the Fed will be able to achieve a soft landing for the economy despite lack of progress in the fight to control inflation. Thus, risk-averse investors who seek returns subject to low risk may opt for large-cap value mutual funds like BNY Mellon Dynamic Value Fund DRGVX, JPMorgan Large Cap Value Fund JLVRX and AB Large Cap Value ABVIX as their major holdings to achieve their objective.

While mutual funds investing in value stocks have the potential to deliver higher returns and exhibit lower volatility compared to growth and blend counterparts, large-cap funds usually provide a safer option than small-cap or mid-cap funds. Thus, investors may look for large-cap value funds to earn in a moderate return volatile environment.

Value funds generally invest in stocks that tend to trade at a price lower than their fundamentals (i.e., earnings, book value, debt-equity) and pay out dividends. Value stocks are expected to outperform the growth ones across all asset classes when considered on a long-term investment horizon and are less susceptible to trending markets.

Meanwhile, large-cap funds have exposure to large-cap stocks that are expected to provide long-term performance history and assure more stability than what mid or small caps offer. Companies with a market capitalization of more than $10 billion are generally considered large caps. However, due to their significant international exposure, large-cap companies might be affected by a global downturn.

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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. 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 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.

Brian Ferguson has been the lead manager of DRGVX since Sept. 30, 2003. Most of the fund’s exposure is in companies like Berkshire Hathaway (4.9%), JPMorgan Chase (3.6%), and Cisco Systems (3.3%) as of Aug. 31, 2024.

DRGVX’s three-year and five-year annualized returns are 15.8% and 16%, respectively. DRGVX has an annual expense ratio of 0.68%.

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

JPMorgan Large Cap Value Fund invests most of its assets, along with borrowings, if any, insecurities of large-cap companies, including common stocks, debt and preferred stocks, which are convertible to common stocks. JLVRX invests in stocks with market capitalization like the one listed on the Russell 1000 Value Index at the time of investment.

Scott Blasdell has been the lead manager of JLVRX since Apr. 4, 2013. Most of the fund’s exposure is in companies like Exxon Mobil (2.8%), Berkshire Hathaway (2.8%) and Wells Fargo (2.4%) and as of Sept. 30, 2024.

JLVRX’s three-year and five-year annualized returns are nearly 14.5% and 14.7%, respectively. JLVRX has an annual expense ratio of 0.54%.

AB Large Cap Value fund invests most of its assets, along with borrowings, if any, ina diversified portfolio of equity securities of large-cap companies. ABVIX advisors invest in companies that are undervalued, using their own fundamental value approach.

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Cem Inal has been the lead manager of ABVIX since Mar. 7, 2016. Most of the fund’s exposure is in companies like Walmart (4%), UnitedHealth Group (3.8%) and Wells Fargo (3.5%) as of Aug. 31, 2024.

ABVIX’s three-year and five-year annualized returns are 13.7% and 13%, respectively. ABVIX has an annual expense ratio of 0.71%.

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