6 Safe Mutual Funds to Own in an Uncertain Market
Tariffs and conflict and oil, oh my! These safe mutual funds are ideal places to hide if you fear this uncertain market.
If you're looking to add stability to your portfolio during uncertain times, you should consider the time-tested shelter of safe mutual funds.
A monthslong war in the Middle East shows no signs of ending. That war has triggered multiple surges for gasoline prices and sent diesel to all-time highs.
Inflation is well above the Federal Reserve's 2% target, and the central bank raised interest rates for the first time since 2023 at the conclusion of the September Fed meeting.
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The White House has renewed its push for global tariffs. And potentially transformational midterm elections are just a month away.
Not exactly sunshine and roses. We certainly can't blame you or anybody else who's looking for a few investments to help take the edge off.
So let's take a look at mutual funds built to provide ballast during the kind of uncertain market environment we're experiencing right now.
How we chose our list of safe mutual funds
We didn’t use a strict methodology to select safe mutual funds, for a few reasons:
- No bear market is exactly like any other. Certain investments that were cleaved during, say, the Great Recession did just fine during the COVID bear market.
- Each of the pressures we mentioned may have different effects on different parts of the market. What would do just fine if the war between the U.S. and Iran ended but tariffs persisted might tank should the opposite occur.
- We must account for the unknown. It's possible that, should the market take a turn for the worse, the trigger might not be one of the aforementioned pressures, but some other shock.
Instead, we looked for a variety of defensive strategies. Some are designed to protect against particular risk factors.
Some have strong track records, even positive performance, during multiple bear markets and corrections. This suggests they can thrive in several downturn scenarios.
But remember that many, though not all, defensive funds involve a simple tradeoff for their low volatility: better performance during downturns, and less robust returns during bull markets.
For that reason, safe mutual funds don't always make for great long-term core allocations. They're better used as "satellite" holdings to augment your portfolio. If you're a more active investor, you can use safe mutual funds as shorter-term positions to ditch once markets normalize.
Data is as of October 6. Dividend yields represent the trailing 12-month yield, a standard measure for equity funds. SEC yields reflect the interest earned for the most recent 30-day period after deducting fund expenses, a standard measure for bond funds. Seven-day SEC yields reflect the interest earned after deducting fund expenses for the most recent seven-day period, a standard measure for money market funds.
T. Rowe Price Dividend Growth Fund
- Type: Large-cap dividend-growth
- Assets under management: $22.5 billion
- Dividend yield: 0.9%
- Expenses: 0.64%, or $64 annually for every $10,000 invested
- Minimum initial investment: $2,500
Let's say you want to hedge against uncertainty, but you still want some exposure to the potential upside the equity market offers. In other words, you don't want to load up on growth stocks. But you're not going straight to Treasury bills and Treasury bonds, either.
What you want to do is emphasize high-quality stocks through a vehicle such as the T. Rowe Price Dividend Growth Fund (PRDGX).
The ability to pay a dividend is often seen as a quality signal. It represents sufficient and stable enough profits that a company can redistribute some of the excess to shareholders, consistently and confidently over time.
Dividend growth takes that logic one step further: A company that raises its payout significantly and/or regularly may be telegraphing management's understanding about growth for its bottom line.
PRDGX manager Tom Huber agrees, and he's built the mutual fund on the belief that "a track record of dividend increases can be an excellent indicator of financial health and growth prospects."
Huber has a fairly loose mandate. Unlike indexed competitors with specific baselines for payout improvement, his fund merely invests in "stocks that have a strong track record of paying dividends or that are expected to increase their dividends over time."
Regardless, PRDGS is jam-packed with cash-flow generators such as Microsoft (MSFT), Visa (V) and Broadcom (AVGO), which have increased their distributions by 47%, 79% and 81%, respectively, over the past five years.
It also holds companies with much longer streaks of dividend growth: S&P 500 Dividend Aristocrats (minimum 25 years of uninterrupted annual dividend growth) and Dividend Kings (minimum 50 years) such as Walmart (WMT) and AbbVie (ABBV).
Just about any stock fund will be exposed to losses in a stock downturn, but PRDGX feels mighty padded compared to your average large-cap blend fund.
But this one has suffered significantly shallower drops than the S&P 500 during broad-market declines in 2026 (Middle East war), 2025 (tariffs) and 2022 (bear market), just to name a few.
Indeed, with a spot on the Kiplinger 25, T. Rowe Price Dividend Growth is one of our favorite mutual funds, full stop.
Learn more about PRDGX at the T. Rowe Price provider site.
Fidelity Select Telecom and Utilities Fund
- Type: Multisector (Communication services and utilities)
- Assets under management: $1.2 billion
- Dividend yield: 2.1%
- Expenses: 0.68%
- Minimum initial investment: $0
The appeal of defensive sectors boils down to this simple logic: When money's tight, you'll cut back on many things, including concert tickets, new sneakers and a Taco Bell "Fourthmeal." But you won't stop paying for your essential services, such as electricity, heat and water.
That's what makes utility stocks particularly resilient against the pressures of a soft economy.
But on the list of what we can't live without, internet and phone service are also there. That’s the thinking behind the Fidelity Select Telecom and Utilities Fund (FIUIX), one of our favorite Fidelity funds for a volatile market.
Pranay Kirpalani and Alex Boyajian have put together a 47-holding portfolio that's largely made up of utilities like NextEra Energy (NEE) and American Electric Power (AEP), but also holds a handful of telecoms like Verizon Communications (VZ) and AT&T (T).
Utes and telcos typically don't offer much in the way of growth. If you get a promotion, it's unlikely that you're going to spend that extra money by cranking up the A/C and running the hose for an extra hour.
So they often entice shareholders with generous dividends instead, and that income provides an additional element of stability. This is particularly attractive during periods of stock-market volatility.
FIUIX, to wit, offers up a 2.1% yield that's about two times what the S&P 500 offers.
Except for the pandemic crash, FIUIX has been downright spectacular during market downturns over the past decade, frequently delivering flattish performance, even gains, while most other equities drown.
Learn more about FIUIX at the Fidelity provider site.
Vanguard Global Minimum Volatility Fund Investor Shares
- Type: Minimum-volatility global stock
- Assets under management: $1.9 billion
- Dividend yield: 2.2%
- Expenses: 0.21%
- Minimum initial investment: $3,000
Two exceedingly popular ways to fight off a turbulent market are low-volatility (low-vol) and minimum-volatility (min-vol) funds. They have similar aims, but their differences are meaningful.
Low-volatility funds evaluate a universe of stocks and pick out the ones that have shown the least volatility over a certain period of time, hoping to create the lowest-volatility portfolio it can.
But minimum-volatility funds typically try to minimize volatility within a certain benchmark, while still resembling the original benchmark in some way.
For instance, an S&P 500 low-vol fund that picks the 20 lowest-volatility stocks in the index might end up holding nothing but utility stocks.
However, an S&P 500 min-vol fund might try to identify low-volatility stocks. But it might be forced to have at least some percentage invested in all 11 sectors, resulting in a portfolio that's not as volatile as the S&P 500, though possibly not as calm as a low-vol fund.
Vanguard doesn't have many options for investing in either type of strategy, but the actively managed Vanguard Global Minimum Volatility Fund Investor Shares (VMVFX) does the job.
VMVFX aims to provide minimum volatility compared with the global equity market. And it delivers, meriting inclusion among our top Vanguard funds for fading an uncertain economic environment.
Like most global funds, VMVFX dedicates almost 60% of its assets to U.S. stocks, with the rest spread across countries such as the U.K., Canada and Taiwan.
From a construction standpoint, Vanguard Global Minimum Volatility exemplifies the minimum-volatility mindset. Its sector allocation looks somewhat similar to the category average, with a few tweaks to reflect its goal of reducing volatility.
For instance, it holds more healthcare stocks and utilities than the category averages. But it's less exposed to tech stocks and consumer discretionary stocks.
Learn more about VMVFX at the Vanguard provider site.
Vanguard Short-Term Inflation-Protected Securities Index Fund Admiral Shares
- Type: Short-term TIPS
- Assets under management: $73.1 billion
- SEC yield: 2.3%
- Expenses: 0.06%
- Minimum initial investment: $3,000
We'll move on to bonds, which can't hold a candle to equities in terms of growth but usually provide more stability and income. We say "usually" because what's happening in the bond market right now warrants your attention.
The Vanguard Short-Term Inflation-Protected Securities Index Fund Admiral Shares (VTAPX) owns Treasury Inflation-Protected Securities (TIPS) with short maturities.
You can check out our primer on TIPS for a fuller explanation. In short, these are U.S. government-issued bonds that pay a fixed rate on a principal that adjusts with changes in the consumer price index (CPI).
When inflation increases, TIPS' principal value rises; when inflation falls, TIPS’ value falls. VTAPX is one of our favorite bond funds because it helps us fight off risk in a few ways:
Interest-rate risk: The longer a bond's term, the more a change in interest rates affects the relative value of its remaining coupon payments. VTAPX owns shorter-duration issues with less interest-rate risk.
Credit risk: Economic stress can impact a bond issuer's ability to pay interest; generally, the lower the quality of the issuer, the greater the risk. TIPS are issued by the U.S. government, which debt ratings agencies still view as one of the most reliable entities on the planet.
Inflation risk: Inflation eats away at the purchasing power of the U.S. dollar. Not only do TIPS rise alongside rising prices. Because their interest payments are calculated as a percentage of the inflation-adjusted principal, inflation can increase TIPS' payments, too.
That last point means that although VTAPX's current SEC yield is modest compared to many traditional short-term bond funds at just over 2%, that's not the final say on what this one will pay.
Vanguard Short-Term Inflation-Protected Securities Index Fund's average duration is 2.5 years, which implies that a percentage-point increase in market interest rates would cause VTAPX to suffer a short-term drop of 2.5%. It also means a similar decrease in rates would cause it to rise a similar amount.
VTAPX also has an exchange-traded fund (ETF) share class. The Vanguard Short-Term Inflation-Protected Securities ETF (VTIP) charges an even thinner 0.03% and has no investment minimum.
Learn more about VTAPX at the Vanguard provider site.
Fidelity Floating Rate High Income Fund
- Type: Bank loans
- Assets under management: $15.1 billion
- SEC yield: 6.7%
- Expenses: 0.73%
- Minimum initial investment: $0
The Fidelity Floating Rate High Income Fund (FFRHX) is an even more off-the-beaten-path solution to uncertain markets.
Bank loans are an odd corner of the fixed-income market. On the one hand, the debt tends to be of the senior secured variety. So it's paid back before other bonds. And it's backed by company assets.
On the other hand, the borrowers tend to be smaller and/or have lower credit quality. So bank loan ratings tend to be low.
Fidelity Floating Rate High Income Fund's trio of managers have compiled roughly 580 bank loans from roughly 450 issuers, including privately held outfits such as Bass Pro Shops, Acrisure and Golden Nugget.
And its credit quality is wanting: A quarter of assets sit in the highest tier of junk ratings (BB). Just 2% enjoys an investment-grade rating. The remaining majority is B-rated or below.
Nonetheless, these holdings could be resilient because they also feature floating rates. This means the interest they pay is tied to a reference rate, such as the Secured Overnight Financing Rate (SOFR), and changes alongside that reference rate.
Why does that matter? Because while an increase to the federal funds rate often causes existing bonds with lower rates to drop in value, floating-rate loans generally see their coupon rates rise, helping the loans maintain their value.
Bank loans are thus said to have low duration risk. We can see it in FFRHX's duration of just 0.2 years, which implies that a percentage-point change in interest rates in either direction would have a minimal impact on its price.
That protection isn't infinite, though. If the Fed begins to aggressively raise rates, the higher repayment rates could take a serious toll on borrowers' balance sheets.
Learn more about FFRHX at the Fidelity provider site.
Vanguard Federal Money Market Fund Investor Shares
- Type: Money market
- Assets under management: $377.8 billion
- 7-day SEC yield: 3.8%
- Expenses: 0.11%
- Minimum initial investment: $3,000
Perhaps the safest move you can make in your brokerage account, short of going straight to cash, is to stash some of your assets into a money market fund.
Money market funds invest in high-quality short-term debt, including Treasury bills and commercial paper. They typically feature a net asset value of $1 per share, and they aim to maintain that value. Growth is not the point, or really even an option.
You get interest income and peace of mind. Nothing more, nothing less.
The Vanguard Federal Money Market Fund Investor Shares (VMFXX) is a government money market fund that owns U.S. government securities and repurchase agreements (known as "repos") collateralized by U.S. government securities or cash.
Right now, the portfolio is a roughly 40/35/25 blend of U.S. government obligations, T-bills and repos.
Most bond funds measure their holdings in terms of years. VMFXX's average maturity is just 24 days. Money market funds' duration risk is so negligible that it's not even listed.
The reward usually matches the risk. Right now, we're seeing a 3.8% yield, reflecting volatility at the short end and across the yield curve. Still, our money remains safe and accessible.
Vanguard is taking much less of that in fees than just about any other provider, at a meager 11 basis points annually. Note that a basis point is one one-hundredth of a percentage point.
Learn more about VMFXX at the Vanguard provider site.
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