+44 7393 450837
Follow on

8 Safest Mutual Funds

The safest mutual funds are an alternative that may appeal to investors who are worried about the possibility of a future economic slowdown.

According to the Securities and Exchange Commission (SEC) of the United States, these funds take the money contributed by a number of different investors and invest it in a variety of assets. These securities include stocks, bonds, and short-term loans.

Is it a good idea to invest in mutual funds? Mutual funds are often cited as one of the most attractive investment choices among investors for a number of compelling reasons.

A significant benefit of professional management is that participants benefit from market research that is carried out by fund managers on their behalf.

Because of this, investors are able to take a “set it and forget it” strategy, while still benefitting from professional monitoring.

In addition, mutual funds provide diversity and are quite inexpensive. Investors may obtain access to a broad variety of possibilities with as little as a very small financial amount.

Because of the instability that now exists in the financial markets, many people are placing a greater emphasis on the preservation of their money.

Individuals who are saving for retirement via self-directed IRAs and employer-sponsored 401(K) plans may find that investing in the safest mutual funds is a reasonable alternative when wanting to protect their money.

Investing in mutual funds allows the general public access to professionally managed portfolios. These portfolios normally consist of stocks and bonds, but they may also contain other assets and commodities.

These aspects have helped to propel the safest mutual funds to the forefront of the mutual fund industry as a viable investment choice.

One of the benefits of investing in mutual funds is the opportunity to build a diverse portfolio using a single fund, often at a cost of management that is more affordable than other investment options.

This enables investors to construct a diversified mutual fund portfolio in a manner that is both efficient and cost-effective.

However, it is crucial to keep in mind that not all mutual funds are equally safe and not all mutual funds are suitable for individual needs.

More reading is required in order to get precise advice on where to find the most reliable investments in mutual funds.

Investors may better understand which solutions are most suited to their risk tolerance, financial objectives, and time horizon by carrying out research and consulting with financial advisors.

If you want to invest as an expat or high-net-worth individual, you can email me (advice@adamfayed.com) or use these contact options.

This article is partly based on subjective opinions. The safest options is always based on your individual situation.

What Makes a Mutual Fund Safe?

Given the broad variety of possibilities that are available to investors within the mutual fund market, it is essential to first examine one’s financial goals in order to properly identify and choose the most appropriate mutual funds that fit with one’s investment goals.

Safest Mutual Funds
Planting the seeds of wealth through mutual funds.

This may be accomplished by conducting an evaluation of one’s financial objectives. It is crucial to obtain a clear knowledge of whether one wishes to get regular income over a short period or to accomplish long-term financial advantages. Both goals are significant, but it is necessary to focus on the long-term goal.  

Long or Short-Term Returns

It is essential for a person who plans to invest in mutual funds for their 401(K) account as part of their retirement planning to give serious consideration to the performance expectations of the mutual fund that they choose during the time period that remains until they retire.

Alternatively, investors who are looking for guaranteed returns on their investments that are both quick and steady may find that a mutual fund that focuses just on dividend-paying stocks is a better alternative for them.

Fund Management

It is in your best interest to do an exhaustive analysis of the management team of the fund in addition to determining its degree of stability.

Is there evidence in its past performance of a repeatable pattern of profitable returns coupled with low rates of personnel turnover?

If you don’t keep the money in a tax-deferred account, it’s important to find out whether or not the fund has a high transaction volume for its assets. If it does, this might result in taxable events that have the potential to have an effect on your overall income.  

Risk Tolerance

After selecting the time horizon for the investment, it is advisable to evaluate one’s level of comfort with the possibility of incurring losses in investable money.

Would you rather invest in a mutual fund that sees modest appreciation and gives a reliable income stream, even if it means witnessing fluctuations in the value of the mutual fund in the short term, in order to receive greater returns in the long run, or are you willing to see fluctuations in the value of the mutual fund in the short term, in order to obtain higher returns in the long term?

When someone is more willing to take risks, there is a larger chance of achieving a higher rate of return (or suffering a bigger loss).

Evaluating the expected rate of return in proportion to the acceptable degree of market volatility is a good method for determining a person’s risk tolerance since it provides a clearer picture of how much they are willing to take on.

The following stage, after defining one’s degree of risk aversion, is to do research and make well-informed decisions on the investments in mutual funds for one’s portfolio, taking into mind one’s risk tolerance. 

Expense Ratio

The ratio that was just discussed indicates the proportion of the fund’s total financial resources that are dedicated to the activities of asset acquisition and management.

The aforementioned includes a compensation charge that is made by investors in order to employ the services of an experienced financial manager who is responsible for trading stocks, bonds, and other assets on behalf of the mutual fund.

This charge is referred to as a “management fee,” and it is included in what is referred to as “the aforementioned.”

There is a large amount of variation in the cost ratios of mutual funds; some easily managed funds have expense ratios as low as 0.015 percent, while the vast majority of funds need to strive to keep their expense ratios at or below one percent. 

8 Safest Mutual Funds

Invesco Small Cap Value Fund (VSCAX)

It’s possible that investors with a higher appetite for risk may discover that the Invesco Small Cap Value fund often directs its assets toward share classes that are more accessible to their budgets. 

The VSCAX fund is associated with an expense ratio of 0.74% and has generated an annual return of 11.21% over the last five years.

The fund is managed by a team of three analysts, each of whom employs an aggressive deep-value technique in the process of selecting companies to invest in.

The analysts’ overarching goal is to achieve a return of fifty percent on the assets they pick within a period of three years.

The analysts are tasked with overseeing the fund’s investment strategy. In addition, it is important to take into consideration the fact that more than half of the fund’s portfolio is invested in cyclical stocks, such as those found in the industrial and consumer discretionary sectors. 

Taking into mind the particular share class of the fund, the fund as a whole has shown a relatively low annual turnover rate, ranging from 28% to 50% during the course of the period starting in 2012.

In order to lessen their vulnerability to the increased volatility, the management of the fund makes conservative projections and places a high priority on cash creation. 

Fidelity 500 Index Fund (FXAIX)

When it comes to investing in the stocks of large-cap firms based in the United States, many people believe that purchasing shares in the Fidelity 500 Index fund is the most effective and economical way to do so.

During the prior five years, the Fidelity 500 Index fund had average returns of 14.5% each year, making it one of the best performers overall. In addition, it is worthwhile to mention that this product has a very low-cost ratio of around 0.015% throughout its production.

The performance of the S&P 500 index, which is comprised of the most highly capitalized corporations that are traded inside the United States stock market, is what the aforementioned mutual fund seeks to mimic as closely as possible in order to achieve its investment objective. 

The investing approach entails allocating money to a portfolio that is comprised of 500 firms that satisfy the investment criteria specified by the committee at Standard & Poor’s that is responsible for administering the index. 

In order to improve the index’s overall risk characteristics, the index committee routinely and methodically removes and replaces stocks of companies that do not meet stringent standards for profitability and liquidity.

This action is taken with the intention of making the index more volatile. The index committee does further analysis of each stock component by considering the company’s total market capitalization.

Because of the fund’s unwavering commitment to the index that is compiled, maintained, and monitored by S&P, the management and operating costs connected with this fund are quite low. 

Additionally, the fund has a manageable amount of unnecessary turnover and offers a beneficial degree of diversity for one’s investing portfolio. Both of these attributes are positive aspects of the fund. 

BlackRock Exchange Portfolio (STSEX)

The BlackRock Exchange Portfolio, which trades under the ticker symbol MUTF:STSEX, is generally recognized as an excellent example of a solid mutual fund.

The fund’s prospectus states that the primary objective of the investment is to seek long-term capital growth, followed by long-term income growth.

According to the information that was supplied, the majority of the entity’s investments are put into a portfolio that is both well-diversified and well-monitored, and that portfolio is comprised of either common stocks or convertible securities.

The maximization of growth potential over a significant amount of time is the major purpose of the investment plan that will be discussed.

Over 11% of the stock market’s value has been added to the STSEX since the beginning of the current year.

The BlackRock Exchange Portfolio’s asset allocation is defined by a substantial concentration on equities, with stocks accounting for 91.3% of the portfolio’s exposure. This reliance on equities contributes to the portfolio’s high level of risk.

Foreign equities make up just 8.2% of the total holdings of STSEX, which places them in a distant second place relative to domestic stocks.

Safest Mutual Funds
Seeding a secure future, one mutual fund at a time.

This represents a slightly smaller share of the entire holdings. After all, is said and done, the leftover sum is put into cash.

Microsoft (NASDAQ: MSFT) commands a sizeable portion of the total net assets and has the leading position in individual holdings.

This share accounts for 26.64% of the total. Following closely after in second place is General Dynamics (NYSE:GD), which has a percentage that is 9.58%, while Berkshire Hathaway (NYSE:BRK-B) has a percentage that is 11.62%.

The management fees for STSEX amount to 0.50%, while the fund’s net expense ratio comes in at 0.77%.

In contrast to the latter, which is in line with the average of the category, the former is lower than the average of the category, which is 0.86%. As a result, it provides a persuasive case in favor of giving consideration to the mutual funds that have the best overall performance.

Schwab Fundamental US Large Company Index Fund (SFLNX)

The Russell RAFI US Big Company Index is the benchmark for the Schwab Fundamental US Large Company Index fund, which is an investment vehicle that focuses on big firms and aims to replicate, as closely as possible, both the index’s composition and its performance.

An investor who is looking to create profits may find that taking a long-term contrarian stance offers them certain benefits. The SFLNX fund has generated an annualized return of 14.1% over the course of the prior five years, while also keeping its cost ratio at 0.36% over this time period.

The benchmark, which is based on the Russell RAFI Index, makes use of a weighting approach that takes into account fundamental indicators in order to reduce the correlation that exists between stock prices and the weights that they get in the various portfolios.

The fund will essentially boost its exposure to shares that have exhibited lesser performance during the yearly rebalancing of the index, while at the same time lowering its holdings in corporations that have shown better value appreciation. 

The aforementioned adjustment technique is founded on a mean reversion strategy, but it has the potential to encumber the fund with corporations that exhibit weaker basic traits and may prematurely divest from enterprises that have proven persistent performance.

Despite these possible drawbacks, the mean reversion strategy remains the foundation of the adjustment methodology.

In spite of the fact that the performance of the fund during the 2010s was unimpressive, a period of mean reversion brought on by the COVID-19 outbreak led to a significant appreciation of the fund in 2020. This appreciation resulted in a large increase in the value of the fund. 

Vanguard Long-Term Investment-Grade Fund (VWESX)

The Vanguard Long-Term Investment-Grade product (MUTF:VWESX), which largely concentrates on corporate bonds, is another exciting idea for reliable investing in mutual funds. 

This product is one of the options offered by Vanguard. According to the information provided in its prospectus, the majority of VWESX’s investments are directed toward investment-grade bonds of outstanding quality.

These bonds are issued by businesses and have an average maturity length that falls anywhere between 15 and 25 years.

There has been a minuscule growth of less than one percent in the value of each unit of the mutual fund since the beginning of the current year. A drop of 8% may be seen by looking back over the course of the preceding calendar year.

As a consequence of this, onlookers get the impression that the Vanguard Long Term mutual fund is not one of the safest mutual funds.

It is important to give VWESX more thought from a holistic point of view, especially when we cross uncharted and unpredictable territory since this is something that deserves our attention. 

For instance, a consistent emphasis on safety and dependability may be seen across its holdings and assets.

The majority of the fund’s holdings are invested in United States Treasury bonds, which make up 1.2% and 0.95% of the fund’s total net assets, respectively.

The third spot on the list is occupied by Microsoft’s debt holdings, which are responsible for 0.89 percent of the company’s total assets.

The VWESX, in general, has the largest degree of exposure to domestic bonds, which comes to 89.6% of the index’s total value.

The interest rate on foreign bonds is 9.5%, which puts them in a much lower position, putting them in second place by a significant margin. Cash constitutes 1.1% of the allocation that is reserved for use as the remaining part of the allocation.

In conclusion, the argument that VWESX is placed among the safest mutual funds focuses mostly on the fund’s fundamental cost structure as the primary justification for its position.

The investment in issue has a net expense ratio of 0.21%, and the management fees come to 0.2% of the total assets under management. In contrast, the averages for the same categories are 0.56% and 0.38% respectively.

At the time that this article was written, Josh Enomoto did not have any interests, either directly or indirectly, in any of the securities that are mentioned within it.

This is an essential fact to keep in mind. The opinions expressed in this piece are those of the author, who is credited for them, and they comply with the guidelines outlined for publishing on InvestorPlace.com.

Josh Enomoto, a former senior business analyst at Sony Electronics, has played a key part in the facilitation of considerable agreements with important firms that are featured in the Fortune Global 500.

Josh Enomoto’s contributions to these endeavors have been significant. In recent years, the person in question has supplied different and necessary viewpoints for the investment markets, in addition to other diversified sectors such as the legal industry, construction management, and the healthcare industry.

Fidelity NASDAQ Composite Index (FNCMX)

The Fidelity NASDAQ Composite Index fund invests roughly 80 percent of its total assets in the purchase of common stocks that are included in the NASDAQ composite index.

This fund’s objective is to replicate the performance of the NASDAQ composite index. In addition, the expenditure ratio for this product is 0.29% of its total sales.

The existence of market volatility has contributed to a decline in the performance of the fund throughout the current year.

It is important to point out, however, that the fund has had a favorable historical performance over the course of the last five years, with a growth rate of 17.2% over this time period. In addition, the fund has generated a return of 16.5% during a period of 10 years of investment.

The price-to-earnings (PE) ratio, dividend yield, price-to-book (PB) ratio, and profits growth are some of the metrics that are considered while determining whether or not to invest in a company’s shares by the fund. It does this by using a methodical selection process to choose shares from the index that have values that are equivalent to those of the index.

This fund is directed primarily at investors who have a higher risk tolerance than the clients who were served by Benzinga’s previous fund choices.

This is because the volatility of smaller-size firms listed on the Nasdaq exchange is slightly higher in contrast to the volatility of large-cap equities. 

T. Rowe Price Dividend Growth Fund (PRDGX)

The T. Rowe Price Dividend Growth Fund (MUTF:PRDGX), which strives to offer investors a considerable and reliable source of passive income, is another wise choice for the safest mutual funds.

This fund was given as an example before. Because of the numerous economic unknowns that now exist, income has evolved into a quality that is highly prized in the present environment of the market.

According to the prospectus, the T. Rowe Price Dividend fund now has assets that total around $21.57 billion. These assets are dispersed throughout a diversified portfolio that currently consists of 105 separate holdings.

Since the beginning of this year, PRDGX has seen a little growth of just over 3%, which is considered to be a minor gain.

Even if the performance of the mutual fund was not very exciting, recent trading sessions have shown a relatively large growth in the fund’s value.

Safest Mutual Funds
Diversifying wisely with mutual funds for financial growth.

At the moment, the fund’s asset allocation consists of a whopping 88 percent in domestic stocks.

With a proportion of 7.8%, foreign stocks are rated in a position that is considerably lower than first place, namely in second place. Cash is the remaining component of the asset distribution, which amounts to 4.3% of the total.

In a manner similar to that of the BlackRock Exchange Portfolio, the PRDGX fund’s dominant position is held by Microsoft.

The company is responsible for 4.21 percent of the fund’s total assets. Apple, which trades on the NASDAQ stock market under the ticker symbol AAPL, holds the position of the second-largest equity holding and is responsible for 2.82% of the company’s total assets. UnitedHealth Group, which trades under the symbol UNH on the New York Stock Exchange, comes in a close second with an ownership of 2.8% of all assets.

PRDGX has a net cost ratio of 0.64%, while its management fee is 0.48% of its total assets. Both of these data fall below the average for the categories in which they are found, with the former displaying a much higher divergence than the latter.

As a result, PRDGX makes a convincing case for investing in the safest mutual funds as an alternative to other investment options.

Voya Russell Large Cap Index Portfolio 1 (IIRLX)

The Voya Russell Large Cap Index Portfolio 1 fund invests more than 80% of its total assets in the purchase of stocks belonging to companies that are included in the index.

These companies are represented by the index. The product’s expenditure ratio is now at 0.43% at the present time.

During the previous period of five years, the IIRLX fund generated an average annual return of 19.1%, and during the preceding period of 10 years, the fund generated an equivalent average annual return of 16.5%.

This fund makes traditional investments in addition to investments in convertible securities such as options and warrants that have the potential to be converted into equities included in the index.

These securities are referred to collectively as convertibles. In addition, the fund participates in the trading of derivatives and exchange-traded funds (ETFs) that closely mimic the returns of the index or the key members that make up the index.  

Final Thoughts

It is wise to consider investing in mutual funds if one has an in-depth knowledge of mutual funds and determines that doing so is consistent with the investment plan they have devised for themselves.

Indeed, having a complete understanding of the workings of the market and the many investment vehicles that are involved with it is necessary in order to guarantee safety in any initiatives involving money.

The monitoring and administration of a team of highly experienced professionals help to reduce the likelihood of fraudulent behavior taking place in an organization.

In point of fact, it is essential to recognize that mutual funds, just like every other kind of financial instrument available on the market, are subject to a certain degree of risk.

Before making any kind of financial investment, whether it be in funds, assets, or enterprises, it is essential to carry out extensive research and analysis in order to guarantee the effective management of one’s own personally earned money.

Although it is possible to buy shares in some mutual funds, such as those provided by Fidelity or Vanguard, without the aid of a stock broker, it is more probable that a competent stock broker will be necessary in order to purchase shares in the mutual fund that is wanted.

Pained by financial indecision? Want to invest with Adam?

smile beige jacket 4 1024x604 1

Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.

Leave a Reply

Your email address will not be published. Required fields are marked *

This website is not designed for American resident readers, or for people from any country where buying investments or distributing such information is illegal. This website is not a solicitation to invest, nor tax, legal, financial or investment advice. We only deal with investors who are expats or high-net-worth/self-certified  individuals, on a non-solicitation basis. Not for the retail market.



Gain free access to Adam’s two expat books.

Gain free access to Adam’s two expat books.

Get more strategies every week on how to be more productive with your finances.