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5 Low Beta Funds to Buy for Renewed Trade War Fears

After months of negotiations between the United States and China, the world’s two biggest economies have once again gone all guns blazing for a trade war. Last week, the U.S. imposed tariffs of around $50 billion on Chinese imports and China retaliated in a similar fashion. Moreover, on the eve of June 18, the Trump government threatened to impose additional tariffs on Chinese goods. Following this development, China, clearly in no mood to sit back, has warned the United States of countermeasures.

In this context, it is important to protect your portfolio from looming trade war concerns and invest in low beta mutual funds.

Looming Trade War Fears a Big Setback for Investors

On June 15, the Trump administration stated that a tariff of 25% will be charged on a wide variety of different Chinese imports that will be around $50 billion. In fact, the office of the U.S. Trade Representative said that starting Jul 6, tariffs will be levied on 818 product lines from China that will add up to $34 billion. Moreover, tariffs will also be placed on another 284 product categories, which will be around $16 billion.

Following this announcement, Lu Kang, China’s Foreign Ministry spokesperson said that the United States’ new tariff move is “provoking the trade war.” Moreover, from April’s number of 106 different product types, China has increased to 659 different product categories of U.S. goods which will be subjected to Chinese tariffs. The Asian nation decided to impose tariff at the same rate, at the same value, and on the same date.

While announcing tariffs on Chinese imports last week Trump said that in case China retaliates in a similar fashion, the United States "will pursue additional tariffs." Like he said on Jun 18, Trump threatened to impose further tariffs of $200 billion “to encourage China to change its unfair practices.” China called this move “blackmail,” and has warned the United States of “strong, powerful countermeasures."

Buy These 5 Low Beta Mutual Funds

Amid such a high level of uncertainty, it will be prudent to pick safe mutual funds. Such funds are inherently less volatile than the markets they trade in. In this case, a low beta ranges from 0 to 1.

We have selected five low beta mutual funds that have given positive one-year annualized returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio.

The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without several commission charges that are associated with stock purchases are the primary reasons why one should be parking their money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

T. Rowe Price Ultra Short-Term Bond TRBUX maintains a diversified portfolio by investing in bonds and other related securities that are rated investment-grade. TRBUX seeks maximization of income by investing mainly in investment-grade government and corporate securities that have low maturity period.

TRBUX carries an expense ratio of 0.35% compared with the category average of 0.49%. Moreover, TRBUX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 1.7%.

TRBUX has a Zacks Mutual Fund Rank #1. Further, Joseph K. Lynagh is the fund manager of TRBUX since 2012. The fund carries a 3-year beta of 0.05.

PIA Short Term Securities Advisor PIASX invests a bulk of its assets in securities that have a duration of three years or lower. The fund generally invests in those securities that are rated Baa3 and/or BBB- or higher by a Nationally Recognized Statistical Rating Organization.

PIASX carries an expense ratio of 0.39% compared with the category average of 0.49%. Moreover, PIASX requires a minimal initial investment of $1,000. The fund has one-year annualized returns of 0.7%.

PIASX has a Zacks Mutual Fund Rank #2. Further, Bistra Pashamova is one of the fund managers of PIASX since 1999. The fund carries a 3-year beta of 0.12.

Vanguard Short-Term Tax-Exempted VWSTX invests mainly in muni bonds that are present in the top three credit-rating groups set by a Nationally Recognized Statistical Rating Organization. Although the fund’s individual securities have no maturity period, VWSTX aims to maintain its dollar-weighted average maturity between one to two years.

VWSTX carries an expense ratio of 0.19% compared with the category average of 0.66%. Moreover, VWSTX requires a minimal initial investment of $3,000. The fund has one-year annualized returns of 0.5%.

VWSTX has a Zacks Mutual Fund Rank #2. Further, Justin A. Schwartz is the fund manager of VWSTX since 2016. The fund carries a three-year beta of 0.14.

Thrivent Limited Maturity Bond Fund Class S THLIX invests a huge part of its assets in debt securities or preferred stocks that are rated "BBB" or higher by the S&P or rated "Baa" or more by Moody’s. THLIX seeks growth of income together with the stability of principal.

THLIX carries an expense ratio of 0.42% compared with the category average of 0.67%. Moreover, THLIX requires a minimal initial investment of $2,000. The fund has one-year annualized returns of 1.1%.

THLIX has a Zacks Mutual Fund Rank #2. Further, Michael G. Landreville is one of the fund managers of THLIX since 1999. The fund carries a three-year beta of 0.21.

Dodge & Cox Income DODIX seeks to maintain a diversified portfolio by investing a large chunk of its assets in investment-grade debt securities and cash equivalents. The fund targets those debt securities for investment, which are rated BBB- or higher by Fitch Ratings or Standard & Poor's Ratings Group, or Baa3 or better by Moody's Investors Service.

DODIX carries an expense ratio of 0.43% compared with the category average of 0.66%. Moreover, DODIX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 0.6%.

DODIX has a Zacks Mutual Fund Rank #1. Further, Dana M. Emery is one of the fund managers of DODIX since 1989. The fund carries a three-year beta of 0.68.

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