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3 Top No-Load Mutual Funds to Build a Solid Portfolio
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Escalating geopolitical tension in the Middle East due to the war between Israel and the Palestine-based militant group Hamas has yet again shattered investors’ confidence. The recent conflict has impacted the global supply chain and will also hurt corporate performance.
Investors are also worried about how the hawkish Federal Reserve will react to high inflation rates. The Consumer Price Index for the month of September remains unchanged from August rise of 3.7% year on year as against 3.2% in July. In a recent speech on Oct 19, 2023 Fed chairman Chair Jerome Powell signalled to retain high interest rates for a prolonged period to keep inflation under check. He also kept the doors open for more rate hikes if economy heats up further.
The U.S. labor market remains tight though weekly jobless claims totaled 198,000 for the month of October, hitting the lowest levels since January. Retail sales also increased more than expected by 0.7% month on month in September. Strong data suggests the economy has withstood a 22-year high interest rate so far. However, many economists fear that a higher interest rate for a long period will cripple the economy and could run into deflation if the Fed sticks to its 2% inflation target which seems unachievable in the near term.
Amid such gloomy market conditions, it is prudent for investors to choose funds that have performed well in the past and have no load. These passively managed funds don’t have any commission fees, or any other charges for buying and selling that are generally associated with actively managed funds.
Sales charges — referred to as a “front-end load,” charged upon purchasing shares, or “back-end load,” charged upon the sale of shares — are absent in such funds because the shares are distributed directly by the investment company, instead of any third-party involvement like broker, advisor or any other type of professional. Even a few additional basis points saved in fees can boost the overall return by minimizing expenses. However, charges like the fund’s expense ratio, 12b-1 fees for marketing, distribution, and service, redemption fees, exchange fees, and account fees are commonly charged even if there is no load.
The load charges are generally within the range of 0-6%. To understand the math, let’s assume an investor wants to invest$1000 in a mutual fund that has a 5% entry and exit load. Then, $950 [$1000-$50 (5% of $1000)] is left with the mutual fund house to invest. Now, let’s assume the fund has given a 15% return over the year. So, the current value of the portfolio is $1092.5 [$950+ $142.5 (15% of $950)]. Now, when an exit load of 5% is applied, the investor is left with $1037.87 [$1092.5-$54.63 (5% of $1092.5)].
According to the above hypothesis, the return earned by the investor with front and back load is 3.78%, whereas he could have enjoyed a much higher return without load.
Wise investors looking for higher returns can consider no-load mutual funds as these have a low expense ratio, which can translate into higher returns, along with other factors like the fund’s performance history, investment style, risk tolerance, etc.
We have thus selected three No-Load mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio compared to the category average. Notably, mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
BNY Mellon Natural Resources Fund (DLDRX - Free Report) invests most of its assets along with borrowings, if any, in common stocks of domestic and foreign natural resources and natural resources-related sectors companies, irrespective of market capitalization. DLDRX also invests in emerging markets securities with similar economic characteristics.
Brock Campbell has been the lead manager of DLDRX since Aug 22, 2023, and most of the fund’s exposure is in companies like Shell PLC (4.8%), Hess (4.8%) and Teck Resources (4.7%) as of 6/30/2023.
DLDRX’s three-year and five-year annualized returns are 34.7% and 14.0%, respectively. DLDRX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.89%, which is less than the category average of 1.11%.
To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Invesco Small Cap Value (VSMIX - Free Report) invests most of its assets along with borrowings, if any, in common stocks of small-capitalization companies, and in derivatives instruments with similar economic characteristics. VSMIX advisors choose to invest in companies, which according to them, are undervalued.
Jonathan Mueller has been the lead manager of VSMIX since Jun 24, 2010, and most of the fund’s exposure is in companies like Western Alliance (3%), Northern Oil & Gas (2.7%) and Teck Resources (2.5%) as of 4/30/2023.
VSMIX’s three-year and five-year annualized returns are 30.5% and 12%, respectively. VSMIX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.84% compared to the category average of 1.16%.
Fidelity Select Semiconductors Portfolio (FSELX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies that areprincipally engaged in the design, manufacture, or sale of semiconductors and semiconductor equipment. FSELX chooses to invest in stocks based on fundamental analysis factors such as each issuer's financial condition and industry position, and market and economic conditions.
Adam Benjamin has been the lead manager of FSELX since Mar 15, 2020. Most of the fund’s exposure was to companies like NVIDIA (32.2%), Marvell Technology (8.3%) and NXP Semiconductors (8.1%) as of May 31, 2023.
FSELX‘s three-year and five-year annualized returns are nearly 26.6% and 26.5%, respectively. FSELX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.69%, which is less than the category average of 1.05%.
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3 Top No-Load Mutual Funds to Build a Solid Portfolio
Escalating geopolitical tension in the Middle East due to the war between Israel and the Palestine-based militant group Hamas has yet again shattered investors’ confidence. The recent conflict has impacted the global supply chain and will also hurt corporate performance.
Investors are also worried about how the hawkish Federal Reserve will react to high inflation rates. The Consumer Price Index for the month of September remains unchanged from August rise of 3.7% year on year as against 3.2% in July. In a recent speech on Oct 19, 2023 Fed chairman Chair Jerome Powell signalled to retain high interest rates for a prolonged period to keep inflation under check. He also kept the doors open for more rate hikes if economy heats up further.
The U.S. labor market remains tight though weekly jobless claims totaled 198,000 for the month of October, hitting the lowest levels since January. Retail sales also increased more than expected by 0.7% month on month in September. Strong data suggests the economy has withstood a 22-year high interest rate so far. However, many economists fear that a higher interest rate for a long period will cripple the economy and could run into deflation if the Fed sticks to its 2% inflation target which seems unachievable in the near term.
Amid such gloomy market conditions, it is prudent for investors to choose funds that have performed well in the past and have no load. These passively managed funds don’t have any commission fees, or any other charges for buying and selling that are generally associated with actively managed funds.
Sales charges — referred to as a “front-end load,” charged upon purchasing shares, or “back-end load,” charged upon the sale of shares — are absent in such funds because the shares are distributed directly by the investment company, instead of any third-party involvement like broker, advisor or any other type of professional. Even a few additional basis points saved in fees can boost the overall return by minimizing expenses. However, charges like the fund’s expense ratio, 12b-1 fees for marketing, distribution, and service, redemption fees, exchange fees, and account fees are commonly charged even if there is no load.
The load charges are generally within the range of 0-6%. To understand the math, let’s assume an investor wants to invest$1000 in a mutual fund that has a 5% entry and exit load. Then, $950 [$1000-$50 (5% of $1000)] is left with the mutual fund house to invest. Now, let’s assume the fund has given a 15% return over the year. So, the current value of the portfolio is $1092.5 [$950+ $142.5 (15% of $950)]. Now, when an exit load of 5% is applied, the investor is left with $1037.87 [$1092.5-$54.63 (5% of $1092.5)].
According to the above hypothesis, the return earned by the investor with front and back load is 3.78%, whereas he could have enjoyed a much higher return without load.
Wise investors looking for higher returns can consider no-load mutual funds as these have a low expense ratio, which can translate into higher returns, along with other factors like the fund’s performance history, investment style, risk tolerance, etc.
We have thus selected three No-Load mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio compared to the category average. Notably, mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
BNY Mellon Natural Resources Fund (DLDRX - Free Report) invests most of its assets along with borrowings, if any, in common stocks of domestic and foreign natural resources and natural resources-related sectors companies, irrespective of market capitalization. DLDRX also invests in emerging markets securities with similar economic characteristics.
Brock Campbell has been the lead manager of DLDRX since Aug 22, 2023, and most of the fund’s exposure is in companies like Shell PLC (4.8%), Hess (4.8%) and Teck Resources (4.7%) as of 6/30/2023.
DLDRX’s three-year and five-year annualized returns are 34.7% and 14.0%, respectively. DLDRX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.89%, which is less than the category average of 1.11%.
To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Invesco Small Cap Value (VSMIX - Free Report) invests most of its assets along with borrowings, if any, in common stocks of small-capitalization companies, and in derivatives instruments with similar economic characteristics. VSMIX advisors choose to invest in companies, which according to them, are undervalued.
Jonathan Mueller has been the lead manager of VSMIX since Jun 24, 2010, and most of the fund’s exposure is in companies like Western Alliance (3%), Northern Oil & Gas (2.7%) and Teck Resources (2.5%) as of 4/30/2023.
VSMIX’s three-year and five-year annualized returns are 30.5% and 12%, respectively. VSMIX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.84% compared to the category average of 1.16%.
Fidelity Select Semiconductors Portfolio (FSELX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies that areprincipally engaged in the design, manufacture, or sale of semiconductors and semiconductor equipment. FSELX chooses to invest in stocks based on fundamental analysis factors such as each issuer's financial condition and industry position, and market and economic conditions.
Adam Benjamin has been the lead manager of FSELX since Mar 15, 2020. Most of the fund’s exposure was to companies like NVIDIA (32.2%), Marvell Technology (8.3%) and NXP Semiconductors (8.1%) as of May 31, 2023.
FSELX‘s three-year and five-year annualized returns are nearly 26.6% and 26.5%, respectively. FSELX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.69%, which is less than the category average of 1.05%.
Want key mutual fund info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>