Volatility in U.S. financial markets continues as the fear of rising inflation weighs on investors' sentiment. After a higher-than-expected Consumer Price Index (CPI) reading, the Producer Price Index (PPI) for the month of January also rose against the consensus estimate, fueling fears that sticky inflation remains in the economy and an early rate cut by the Federal Reserve is unlikely.

However, major U.S. indexes like the Dow, the S&P 500 and the tech-heavy Nasdaq have returned 16.5%, 24.2% and 34.4%, respectively, over the past year.

After the Bureau of Labor Statistics reported on Feb 14 that the CPI for the month of January rose 0.3% monthly against the Wall Street expectation of 0.2%. PPI, or wholesale prices, which measure the prices of domestic goods and services of producers, increased 0.3% for the month of January against the street expectation of 0.1%. This biggest rise in PPI since August further complicates the inflation trend.

In its last policy meeting, the Fed has kept the overnight interest rate unchanged in the range of 5.25-5.5%, the highest level since 2001. By keeping the interest rate higher for longer, the Fed intends to slow down the overall economy to meet its ambitious target of 2% inflation. High interest rates make borrowing money more expensive, which will, over time, impact corporate performance and, thereby, stock prices.

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 the shares are distributed directly by the investment company, instead of any third-party involvement like broker, advisor, or another 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 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), have positive 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 Advisor Energy (FIKAX Quick QuoteFIKAX - Free Report) fund invests most of its net assets in common stocks of domestic and foreign companies that are principally engaged in the energy sectors like the conventional areas of oil, gas, electricity and coal, and newer sources of energy such as nuclear, geothermal, oil shale and solar power. FIKAX 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 FIKAX since Dec 31, 2019. Most of the fund’s holdings was in companies like Exxon Mobil (23.8%), Cenovus Energy (5.3%) and Canadian Natural Resource (5.2%) as of Oct 31, 2023.

FIKAX’s three-year and five-year annualized returns are 34.8% and 11.1%, respectively. FIKAX has an annual expense ratio of 0.61%.

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

Fidelity Select Insurance Portfolio (FSPCX Quick QuoteFSPCX - Free Report) fund invests most of its net assets in common stocks of domestic and foreign companies that are principally engaged in underwriting, reinsuring, selling, distributing, or placing of property and casualty, life, or health insurance. FSPCX advisors choose to invest in stocks based on fundamental analysis factors such as financial condition, industry position, as well as market and economic conditions.

Fahim Razzaque has been the lead manager of FSPCX since Jul 14, 2022. Most of the fund’s holdings was in companies like Marsh & Mclennan (11.3%), Chubb (9.8%) and The Travelers Companies (7.9%) as of Nov 30, 2023.

FSPCX’s three-year and five-year annualized returns are 20.2% and 15.2%, respectively. FSPCX has an annual expense ratio of 0.80%.

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 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. Most of the fund’s exposure was in companies like Leonardo Spa (2.4%), Pinnacle Financial Partner (2.3%) and Northern Oil & Gas (2.3%) as of Oct 31, 2023.

VSMIX’s three-year and five-year annualized returns are 20.1% and 16.7%, respectively. VSMIX has an annual expense ratio of 0.86%.

BlackRock Exchange Portfolio BlackRock (STSEX Quick QuoteSTSEX - Free Report) fund seeks to minimize capital gains by investing most of its net assets in a diversified and managed portfolio of common stocks and convertible securities, which its fund manager believes as having growth potential at the time of purchase. STSEX advisors choose to invest mostly in mid and large-market capitalization companies.

Caroline Bottinelli has been the lead manager of STSEX since May 16, 2022. Most of the fund’s exposure was in companies like Microsoft (32.6%), Berkshire Hathaway (11.6%) and General Dynamics (7.6%) as of Jun 30, 2023.

STSEX’s three-year and five-year annualized returns are almost 16% and 16%, respectively. STSEX has an annual expense ratio of 0.62%.

BNY Mellon Income Stock (BMIIX Quick QuoteBMIIX - Free Report) invests most of its assets, along with borrowings, if any, in dividend-paying stocks and other investments preferably in large-cap companies. BMIIX advisors choose to invest in stocks with value or growth characteristics.

Brian Ferguson has been the lead manager of BMIIX since Dec 31, 2015, and most of the fund’s exposure was in companies like JPMorgan Chase (4.1%), Medtronic (3.9%) and ABBvie (3.7%) as of Nov 30, 2023.

BMIIX’s three-year and five-year annualized returns are 14.9% and 12.2%, respectively. BMIIX has an annual expense ratio of 0.90%.

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