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4 Top No-Load Mutual Funds to Build a Solid Portfolio
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Major U.S indexes touched record highs after the Federal Reserve boosted investor sentiment with a 50-basis point rate cut at the September FOMC meeting. Currently, the overnight interest rate is in the range of 4.75-5.00%. In addition, Fed Chair Jerome Powell, in his speech, projected the interest rate to fall further by 50 basis points till the end of this year, a full percentage point in 2025, and half of a percentage point in 2026 to bring back interest rates to the 2.75-3% range.
The consumer price index for the month of August rose 2.5% year over year, the lowest level since February 2021. Since inflation has eased, reducing high interest rates will avoid unnecessarily higher unemployment rates and keep economic growth intact.
Amid current market conditions, investors looking for higher returns can consider no-load mutual funds like Fidelity Select Energy (FSENX - Free Report) , Fidelity Select Semiconductors Portfolio (FSELX - Free Report) , Invesco Small Cap Value (VSMIX - Free Report) and BNY Mellon Dynamic Value Fund (DRGVX - Free Report) as these have a low expense ratio, which can translate into higher returns. Other factors like the funds’ performance history, investment style and risk tolerance also act in their favor.
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 a 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 returns earned by the investor with front and back load is 3.78%, whereas he could have enjoyed a much higher return without load.
We have thus selected four 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 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 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 was 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 29.2% and 16%, 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 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 (25.0%), NXP Semiconductors (6.9%) and ON Semiconductors (6.7%) as of May 31, 2024.
FSELX’s three-year and five-year annualized returns are nearly 26.1% and 36.3%, respectively. FSELX has an annual expense ratio of 0.67%.
Invesco Small Cap Value 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 June 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 17.4% and 21.8%, respectively. VSMIX has an annual expense ratio of 0.86%.
BNY Mellon Dynamic Value Fund 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 Sept. 21, 2021. Most of the fund’s exposure was in companies like JPMorgan Chase (4.3%), Berkshire Hathaway (4.0%), and Danaher (2.8%) as of May 31, 2024.
DRGVX’s three-year and five-year annualized returns are 12.6% and 16.1%, respectively. DRGVX has an annual expense ratio of 0.68%.
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4 Top No-Load Mutual Funds to Build a Solid Portfolio
Major U.S indexes touched record highs after the Federal Reserve boosted investor sentiment with a 50-basis point rate cut at the September FOMC meeting. Currently, the overnight interest rate is in the range of 4.75-5.00%. In addition, Fed Chair Jerome Powell, in his speech, projected the interest rate to fall further by 50 basis points till the end of this year, a full percentage point in 2025, and half of a percentage point in 2026 to bring back interest rates to the 2.75-3% range.
The consumer price index for the month of August rose 2.5% year over year, the lowest level since February 2021. Since inflation has eased, reducing high interest rates will avoid unnecessarily higher unemployment rates and keep economic growth intact.
Amid current market conditions, investors looking for higher returns can consider no-load mutual funds like Fidelity Select Energy (FSENX - Free Report) , Fidelity Select Semiconductors Portfolio (FSELX - Free Report) , Invesco Small Cap Value (VSMIX - Free Report) and BNY Mellon Dynamic Value Fund (DRGVX - Free Report) as these have a low expense ratio, which can translate into higher returns. Other factors like the funds’ performance history, investment style and risk tolerance also act in their favor.
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 a 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 returns earned by the investor with front and back load is 3.78%, whereas he could have enjoyed a much higher return without load.
We have thus selected four 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 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 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 was 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 29.2% and 16%, 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 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 (25.0%), NXP Semiconductors (6.9%) and ON Semiconductors (6.7%) as of May 31, 2024.
FSELX’s three-year and five-year annualized returns are nearly 26.1% and 36.3%, respectively. FSELX has an annual expense ratio of 0.67%.
Invesco Small Cap Value 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 June 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 17.4% and 21.8%, respectively. VSMIX has an annual expense ratio of 0.86%.
BNY Mellon Dynamic Value Fund 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 Sept. 21, 2021. Most of the fund’s exposure was in companies like JPMorgan Chase (4.3%), Berkshire Hathaway (4.0%), and Danaher (2.8%) as of May 31, 2024.
DRGVX’s three-year and five-year annualized returns are 12.6% and 16.1%, respectively. DRGVX has an annual expense ratio of 0.68%.
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 >>