4 Dividend-Paying Funds Amid Global Economic Gloom
Zacks Investment Research | Aug 28, 2019 10:17PM ET
The slowdown in a couple of global economies is increasingly becoming a concern as trade-related issues and an inverted yield curve are getting on investors’ nerves. Economic uncertainty is affecting not just developed economies but also emerging markets. In such a scenario, one can opt for a steady source of income by investing in dividend-paying mutual funds.
Global Slowdown Affects Market Sentiment
The global economy is facing a string of threats at present but none as severe as the U.S.-China trade war. The tariff war that started last year in July between two of the world’s largest economies is now affecting manufacturing sectors globally because of lower demand for consumer goods.
First, new tariffs are ready to be implemented in September and October by both parties. Owing to this, business investments have taken the road south along with consumer confidence. Second, China is making strategic decisions to restructure its economic scenario as relation with U.S. grows grim. Therefore a trade resolution in the near term is highly unlikely.
Finally, the fear of a no-deal Brexit is affecting investor sentiment as well, since it would be a significant setback for growth in the United Kingdom and Europe. The British economy sank 0.2% in the second quarter, marking its first dip in seven years. In fact, Germany’s impending recession is also because of weaker sales in Britain and China, which is a direct impact of the aforementioned factors.
Dividend Funds Could be Ideal Right Now
Given the glum outlook, it would be prudent to consider dividend-paying mutual funds for investments. First, this offers a steady source of income amid market volatility and economic uncertainty. Second, the companies that provide dividends usually have strong fundamentals and the ability to ride out economic setbacks.
Our Choices
We have, therefore, selected four dividend-paying mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three- and five-year returns. Additionally, the minimum initial investment is within $5,000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
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: Zacks Investment Research
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