High inflation, which has been the biggest threat to the U.S. economy since the end of 2021, is slowly coming down due to aggressive hawkish stances taken by the Federal Reserve. The consumer price index (CPI) for the month of July moderately rose by 0.2% and 3% on a yearly basis, whereas the producer price index (PPI) over the same period also edged up 0.1%. The declining trend in CPI noticed over the past three months, along with a mild rise in PPI last month, suggests that inflation will slowly meet the Fed’s 2% inflation target.

The advance GDP growth rate estimates for Q2 have increased at an annual rate of 2.8% compared with the real GDP growth of 1.4% in Q1. Retail sales also increased 1%, the largest increase since January 2023. Nonfarm payroll jobs totaled 158.7 million through July, an increase of 1.6% from the past year. All eyes are on the Fed chairman’s comments and the upcoming Jackson Hole Symposium.

Why Choose No-Load Mutual Funds Now?

Investors who have disposable income and wish to diversify their portfolio can opt for no-load mutual funds. 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.

The sales charges — referred to as a “front-end load,” which is charged upon purchasing shares, or “back-end load,” which is charged upon the selling of shares — are absent in such funds because shares are distributed directly by the investment company, instead of any third-party involvement like broker, advisor, or other professionals. 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.

A Hypothetical Example

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.

Buy 5 No-Load Mutual Funds: FSENX, FSELX, MLPTX, VSMIX, DRGVX

Wise investors looking for higher returns can consider no-load mutual funds as it has 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 five no-load mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy), three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio of less than 1%. 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).

Fidelity Select Energy (FSENX Quick QuoteFSENX - Free Report) fund invests most of its net assets in common stocks of domestic and foreign companies that areprincipally engaged in the energy field, including the conventional areas of oil, gas, electricity, and coal, and newer sources of energy such as nuclear, geothermal, oil shale, and solar power. FSENX advisors choose to invest in stocks based on fundamental analysis factors like financial condition and industry position, along with market and economic conditions.

Maurice FitzMaurice has been the lead manager of FSENX since Jan 1, 2020. Most of the fund’s exposure is in companies like Exxon Mobil (24.8%), Cenovus Energy (6.2%) and Schlumberger (5.0%) as of May 31, 2024.

FSENX’s three-year and five-year annualized returns are almost 30.8% and 14.8%, respectively. FSENX has an annual expense ratio of 0.73%.

To see how this fund performed compared to its category and other 1, 2, and 3 Ranked Mutual Funds, please click here.

Fidelity Select Semiconductors Portfolio (FSELX Quick QuoteFSELX - 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 advisors 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 (25.0%), NXP Semiconductors (6.7%) and ON Semiconductors (6.7%) as of May 31, 2024.

FSELX’s three-year and five-year annualized returns are nearly 28.3% and 35.3%, respectively. FSELX has an annual expense ratio of 0.67%.

Invesco SteelPath MLP Select 40 Fund (MLPTX Quick QuoteMLPTX - Free Report) invests most of its assets along with borrowings, if any, in the master limited partnership of companies, which are engaged in the transportation, storage, processing, refining, marketing, exploration, production, and mining of minerals and natural resources. MLPTX advisors also invest in derivatives and other instruments with similar economic characteristics in the same industry.

Stuart Cartner has been the lead manager of MLPTX since Mar 30, 2010. Most of the fund’s exposure was in companies like Energy Transfer (8.1%), MPLX (7.4%) and Western Midstream Partner (6.1%) as of May 31, 2024.

MLPTX’sthree-year and five-year annualized returns are 22.9% and 12.1%, respectively. MLPTX has an annual expense ratio of 0.87%.

Invesco Small Cap Value (VSMIX Quick QuoteVSMIX - Free Report) fund invests most of its assets along with borrowings, if any, in common stocks of small-capitalization companies and derivatives instruments with similar economic characteristics. VSMIX advisors choose to invest in companies that, according to them, are undervalued.

Jonathan Mueller has been the lead manager of VSMIX since Jun 24, 2010. Most of the fund’s exposure was in companies like Vertiv Holdings (3.2%), Coherent (3%) and Lumentum (3.0%) as of Apr 30, 2024.

VSMIX’s three-year and five-year annualized returns are 17.6% and 20.3%, respectively. VSMIX has an annual expense ratio of 0.86%.

BNY Mellon Dynamic Value Fund (DRGVX Quick QuoteDRGVX - Free Report) invests most of its assets along with borrowings, if any, in stocks of companies that have value, sound business fundamentals, and positive business momentum evaluated on extensive quantitative and fundamental research using a bottom-up approach by portfolio managers. DRGVX also invests a small portion of its net assets in foreign equity securities with similar economic features.

Keith Howell Jr. has been the lead manager of DRGVX since Sep 21, 2021. Most of the fund’s exposure was in companies like JPMorgan Chase (4.6%), Berkshire Hathaway (3.6%), and Danaher (3.3%) as of Feb 29, 2024.

DRGVX’s three-year and five-year annualized returns are 12.5% and 14.4%, respectively. DRGVX has an annual expense ratio of 0.68%.

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