Wall Street has been bleeding on fresh inflation worries after stronger-than-expected service sector data since February. On Sep 7, the Institute for Supply Management (ISM) said its non-manufacturing Purchasing Managers' Index for the month of August climbed to 54.5% from 52.7% in July. Due to such sticky inflation, investors expect the Federal Reserve to continue with its tightened monetary policy stance in its upcoming meeting later in September.  

Also, Fed Chairman Jerome Powell, in his speech in Jackson Hole, made it clear that the Fed is more concerned about keeping inflation under check and achieving its 2% target over the long-term period by using additional monetary tightening measures whenever required.

Amid such gloomy market conditions, it is prudent for investors to choose funds that have performed well so far this year 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 $10000 in a mutual fund that has a 5% entry and exit load. Then, $9500 ($10000 - $500 [5% of $10000]) 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 $10925 ($9500+ $1425 [15% of $9500]). Now, when an exit load of 5% is applied, the investor is left with $10378.75 ($10925 - $546.25 [5% of $10925]).

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 year-to-date (YTD), three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio. 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 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 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 YTD, three-year and five-year annualized returns are nearly 65.9%, 33.3% and 24.7%, 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%.

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

Fidelity Blue Chip Growth (FBGKX Quick QuoteFBGKX - Free Report) invests most of its net assets in common stocks of domestic and foreign blue-chip companies that, according to its advisors, are well-known, well-established and well-capitalized, having large or medium market capitalization. FBGKX advisors choose to invest in stocks based on fundamental analysis factors such as each issuer's financial condition and industry position, and market and economic conditions.

Sonu Kalra has been the lead manager of FBGKX since Jun 30, 2009, and most of the fund’s exposure was in companies like Apple (10.2%), Microsoft (9.5%) and NVIDIA (7.6%) as of Apr 30, 2023.

FBGKX’s YTD, three-year and five-year annualized returns are 42.7%, 11.9% and 16.4%, respectively. FBGKX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.62% compared with the category average of 0.99%.

JPMorgan U.S. GARP Equity Fund (JGIRX Quick QuoteJGIRX - Free Report) invests most of its assets along with borrowing if any, in a portfolio of equity securities of large and mid-cap domestic companies. JGIRX advisors invest in companies that its advisors believe have attractive valuations, high quality and strong momentum that should lead to relative outperformance.

Andrew Stern has been the lead manager of JGIRX since Oct 31, 2019, and most of the fund’s exposure was in companies like Microsoft (10.9%), Apple (10.4%) and Amazon.com (4.9%) as of Mar 31, 2023.

JGIRX’s YTD, three-year and five-year annualized returns are 30.3%, 12.8% and 12.9%, respectively. JGIRX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.44% compared with the category average of 0.99%.

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