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After strong growth in the first month of this year, the stock market entered into correction territory in February followed by a sharp decline in March due to a tech slump and trade war fears.
Given the negative outlook, no-load mutual funds are again in demand. Mutual funds with no sales or commission charges are known as no-load funds. This generally happens when funds are traded directly through the investment company and not through some secondary entity.
This implies that these funds do not carry the burden of management fees unlike funds with entry or exit loads. It comes as no surprise that no-load funds have managed to provide better returns compared to load funds in the last one year.
Dow, S&P 500 Down in The Red in Q1
Both the Dow and the S&P lost 2.3% and 1.2%, respectively. Both indexes traded in the red after nine straight quarters of gain. Moreover, Wall Street’s fear gauge, the Cboe Volatility Index (VIX), surged 81% over the first quarter, marking its biggest quarterly increase since 2011, according to the WSJ Market Data Group.
The indexes posted gains during the month of January, but tanked around 10% in February due to high inflationary expectations. Stocks continued to suffer in March due to concerns over a possible global trade war initiated by President Trump’s tariff plans. Additionally, the tech stock plunge that occurred due to certain company-related issues also weighed on markets.
Why Invest in No-Load Funds?
With the broader market sliding, investing in funds that won’t burn a hole in your pocket seems prudent. Thus, investing in no-load funds won’t be a bad proposition. After all, no-load funds are those that do not bear any sales or commission charge at the time of buying or selling funds. This generally happens when funds are traded directly through the investment company and not through some secondary entity. Sales load is normally divided into front-end sales load and back-end sales load.
Front-End Sales Load: These are fees paid at the time of investment. Also, categorized as “Sales Charge (Load) on Purchases,” these are charges an investor pays while purchasing a fund. The front-end sales load is deducted from the actual invested amount, and the remaining portion is actually used to buy funds.
Back-End Sales Load: These are fees paid while selling the investments. Categorized as the “Deferred Sales Charge (Load)," these fees are deducted while redeeming fund shares. The advantage of back-end sales load over front-end sales load is that the entire capital (minus other charges) is invested at the time of purchase. The sales load here is calculated off the initial investment made and not based on ultimate fund value.
Comparative Analysis of No-Load Funds
Among the top no-load fund category, Matthews China Investor (MCHFX - Free Report) has no front or back sales loads. On the other hand, the top-load fund BlackRock Technology Opportunities Investor A (BGSAX - Free Report) has sales load of 5.25.
We have, moreover, compared the average one-year annualized returns of the top 100 no-load funds with the top 100 load funds. Out of all the 848 Zacks Rank #1 (Strong Buy) non-load funds the top 100 funds offered a one-year average annualized return of 31.3%. In contrast, of the 281 Zacks Rank #1 load funds, the top 100 funds posted a one-year average annualized return of only 23.6%. With no-load funds registering comparatively better returns than load funds in the last one year, no-load funds are surely expected to get more attention in the coming months.
5 Zacks Rank #1 No-Load Fundsto Buy Now
We have, thus, highlighted five no-load mutual funds flaunting a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging first-quarter and one-year returns. Additionally, the minimum initial investment is within $5000 and net assets are above $50 million.
We expect these funds to outperform 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 success of the fund.
Oppenheimer Global Opportunities Y (OGIYX - Free Report) primarily invests in a wide range of domestic and foreign equity securities. OGIYX focuses on acquiring stocks but may also purchase debt securities. The fund may invest around one-fourth of its assets in securities that are rated lower than investment-grade or "junk bonds." Moreover, OGIYX may invest in developing or emerging countries.
The fund has first-quarter and one-year returns of 8.3% and 41.2%, respectively. OGIYX has an annual expense ratio of 0.92% as compared with the category average of 1.41%.
Janus Global Technology T (JAGTX - Free Report) invests a large chunk of its assets in equity securities of both domestic and foreign companies that are expected to gain from improvements or advancements in technology. JAGTX seeks capital appreciation for the long run. It generally invests in companies from different nations including the United States.
The fund has first-quarter and one-year returns of 6% and 37.2%, respectively. JAGTX has an expense ratio of 0.93% as compared with the category average of 1.38%.
Fidelity Select Defense & Aerospace Portfolio (FSDAX - Free Report) invests a huge portion of its assets in securities of companies principally engaged in the research, manufacture, or sale of products or services related to the defense or aerospace industries. It invests in both U.S. and non-U.S. companies.
The fund has first-quarter and one-year returns of 7.2% and 37.1%, respectively. FSDAX has an expense ratio of 0.79% as compared with the category average of 1.24%.
Matthews Asia Growth Investor (MPACX - Free Report) seeks to achieve its investment objective by investing the majority of its assets in preferred and common stocks of companies located in Asia. It may also invest in convertible securities of different quality and duration, of Asian companies. MPACX seeks capital growth for the long run.
The fund has first-quarter and one-year returns of 4% and 35.9%, respectively. MPACX has an expense ratio of 1.14% as compared with the category average of 1.29%.
Fidelity China Region (FHKCX - Free Report) seeks appreciation of capital for the long run. FHKCX invests heavily in Chinese, Taiwanese and Hong Kong companies. It uses fundamental analysis of factors like economic and market conditions and industry and financial position.
The fund has first-quarter and one-year returns of 0.2% and 35.6%, respectively. FHKCX has an expense ratio of 1.00% as compared with the category average of 1.69%.
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5 Best-Performing No-Load Mutual Funds of Q1
After strong growth in the first month of this year, the stock market entered into correction territory in February followed by a sharp decline in March due to a tech slump and trade war fears.
Given the negative outlook, no-load mutual funds are again in demand. Mutual funds with no sales or commission charges are known as no-load funds. This generally happens when funds are traded directly through the investment company and not through some secondary entity.
This implies that these funds do not carry the burden of management fees unlike funds with entry or exit loads. It comes as no surprise that no-load funds have managed to provide better returns compared to load funds in the last one year.
Dow, S&P 500 Down in The Red in Q1
Both the Dow and the S&P lost 2.3% and 1.2%, respectively. Both indexes traded in the red after nine straight quarters of gain. Moreover, Wall Street’s fear gauge, the Cboe Volatility Index (VIX), surged 81% over the first quarter, marking its biggest quarterly increase since 2011, according to the WSJ Market Data Group.
The indexes posted gains during the month of January, but tanked around 10% in February due to high inflationary expectations. Stocks continued to suffer in March due to concerns over a possible global trade war initiated by President Trump’s tariff plans. Additionally, the tech stock plunge that occurred due to certain company-related issues also weighed on markets.
Why Invest in No-Load Funds?
With the broader market sliding, investing in funds that won’t burn a hole in your pocket seems prudent. Thus, investing in no-load funds won’t be a bad proposition. After all, no-load funds are those that do not bear any sales or commission charge at the time of buying or selling funds. This generally happens when funds are traded directly through the investment company and not through some secondary entity. Sales load is normally divided into front-end sales load and back-end sales load.
Front-End Sales Load: These are fees paid at the time of investment. Also, categorized as “Sales Charge (Load) on Purchases,” these are charges an investor pays while purchasing a fund. The front-end sales load is deducted from the actual invested amount, and the remaining portion is actually used to buy funds.
Back-End Sales Load: These are fees paid while selling the investments. Categorized as the “Deferred Sales Charge (Load)," these fees are deducted while redeeming fund shares. The advantage of back-end sales load over front-end sales load is that the entire capital (minus other charges) is invested at the time of purchase. The sales load here is calculated off the initial investment made and not based on ultimate fund value.
Comparative Analysis of No-Load Funds
Among the top no-load fund category, Matthews China Investor (MCHFX - Free Report) has no front or back sales loads. On the other hand, the top-load fund BlackRock Technology Opportunities Investor A (BGSAX - Free Report) has sales load of 5.25.
We have, moreover, compared the average one-year annualized returns of the top 100 no-load funds with the top 100 load funds. Out of all the 848 Zacks Rank #1 (Strong Buy) non-load funds the top 100 funds offered a one-year average annualized return of 31.3%. In contrast, of the 281 Zacks Rank #1 load funds, the top 100 funds posted a one-year average annualized return of only 23.6%. With no-load funds registering comparatively better returns than load funds in the last one year, no-load funds are surely expected to get more attention in the coming months.
5 Zacks Rank #1 No-Load Fundsto Buy Now
We have, thus, highlighted five no-load mutual funds flaunting a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging first-quarter and one-year returns. Additionally, the minimum initial investment is within $5000 and net assets are above $50 million.
We expect these funds to outperform 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 success of the fund.
Oppenheimer Global Opportunities Y (OGIYX - Free Report) primarily invests in a wide range of domestic and foreign equity securities. OGIYX focuses on acquiring stocks but may also purchase debt securities. The fund may invest around one-fourth of its assets in securities that are rated lower than investment-grade or "junk bonds." Moreover, OGIYX may invest in developing or emerging countries.
The fund has first-quarter and one-year returns of 8.3% and 41.2%, respectively. OGIYX has an annual expense ratio of 0.92% as compared with the category average of 1.41%.
Janus Global Technology T (JAGTX - Free Report) invests a large chunk of its assets in equity securities of both domestic and foreign companies that are expected to gain from improvements or advancements in technology. JAGTX seeks capital appreciation for the long run. It generally invests in companies from different nations including the United States.
The fund has first-quarter and one-year returns of 6% and 37.2%, respectively. JAGTX has an expense ratio of 0.93% as compared with the category average of 1.38%.
Fidelity Select Defense & Aerospace Portfolio (FSDAX - Free Report) invests a huge portion of its assets in securities of companies principally engaged in the research, manufacture, or sale of products or services related to the defense or aerospace industries. It invests in both U.S. and non-U.S. companies.
The fund has first-quarter and one-year returns of 7.2% and 37.1%, respectively. FSDAX has an expense ratio of 0.79% as compared with the category average of 1.24%.
Matthews Asia Growth Investor (MPACX - Free Report) seeks to achieve its investment objective by investing the majority of its assets in preferred and common stocks of companies located in Asia. It may also invest in convertible securities of different quality and duration, of Asian companies. MPACX seeks capital growth for the long run.
The fund has first-quarter and one-year returns of 4% and 35.9%, respectively. MPACX has an expense ratio of 1.14% as compared with the category average of 1.29%.
Fidelity China Region (FHKCX - Free Report) seeks appreciation of capital for the long run. FHKCX invests heavily in Chinese, Taiwanese and Hong Kong companies. It uses fundamental analysis of factors like economic and market conditions and industry and financial position.
The fund has first-quarter and one-year returns of 0.2% and 35.6%, respectively. FHKCX has an expense ratio of 1.00% as compared with the category average of 1.69%.
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 >>