The Federal Reserve has adopted an aggressive monetary policy to tame inflation with yet another 75-basis point interest rate hike in its last meeting in September. The consumer price index (CPI) for the month of August rose 0.1% after remaining unchanged for the month of July, mostly because of the increasing prices of goods and services, including rents, food and healthcare.
Inflation is still hovering at a four-decade high and is pinching hard the pockets of an average American. The Fed chairman has signaled in his speech that the central bank would continue with its rate hike stance to bring inflation to its desired level of around 2%.
Investors suffering from the beginning of this year have reacted bearishly toward Fed’s hawkish stance since such tightening measures to curb inflation might derail economic growth in the near future. After all, interest rate hikes will increase the cost of borrowing, impact consumer spending, increase unemployment and slow down economic growth, which will eventually push the economy toward a recession. The S&P 500, the DOW & the Nasdaq declined 23.62%, 19.57%, and 31.37%, respectively, so far this year.
On the other hand, the incessant Russia-Ukraine war and rising military tension between China and Taiwan are also disrupting the global supply-chain environment in their own ways. Thus, investors looking to diversify their portfolios and earn a regular income in such uncertain times can choose to invest in dividend-paying mutual funds.
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 three mutual funds that have a promising dividend yield, have given impressive 3-year and 5-year annualized returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio.
Invesco Balanced-Risk Allocation Fund ( – Free Report) seeks to achieve positive returns during a market downturn by investing in derivative instruments like futures, options, currency forward contracts and swap agreements. ABRYX invests in multiple asset classes.
Mark Ahnrud has been the lead manager of ABRYX since Jun 2, 2009, and most of the fund’s exposure is in sectors such as the money market, U.S. treasury bonds and U.S. treasury bills.
ABRYX’s dividend yield is 13.9%. The fund’s 3-year and 5-year annualized returns are 3.6% and 3.4%, respectively. The annual expense ratio of 1.04% is lower than the category average of 1.29%. ABRYX has a Zacks Mutual Fund Rank #2.
To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
A.B. Global Risk Allocation Fund Class I ( – Free Report) seeks total return consistent with reasonable risks through income-generation and long-term growth of capital by investing in a portfolio of global asset classes, including equity/credit, fixed-income, and inflation-sensitive instruments. CABIX also invests in hybrid securities.
Leon Zhu has been the lead manager of CABIX since Oct 8, 2012, and most of the fund’s exposure is in sectors such as others, technology and finance.
CABIX’s dividend yield is 10.0%. The fund’s 3-year and 5-year annualized returns are 6.6% and 5.1%, respectively. The annual expense ratio of 1.07% is lower than the category average of 1.29%. CABIX has a Zacks Mutual Fund Rank #1.
Cohen & Steers Real Assets Fund Inc Class Z ( – Free Report) invests most of its net assets domestic and foreign companies with exposure in real estate companies, including real estate investment trusts, commodities, natural resource companies, infrastructure companies, and gold and other precious metals. RAPZX also invests in short-term, fixed-income securities
Benjamin Morton has been the lead manager of RAPZX since Jan 31, 2012, and most of the fund’s exposure is in sectors such as others, finance and industrial cyclical.
RAPZX’s dividend yield is 7.6%. The fund’s 3-year and 5-year annualized returns are 9.0% and 6.7%, respectively. The annual expense ratio of 0.80% is lower than the category average of 1%. RAPZX has a Zacks Mutual Fund Rank #1.
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