Major U.S. indexes — the Nasdaq Composite, the S&P 500 and the Dow Jones Industrial Average — have gained 25%, 21.4% and 16%, respectively, over the past year. However, investors are concerned about the impact of President Donald Trump’s international tariff policies on global trade and supply-chain management. Rising inflation, along with uncertainty over Trump’s fiscal policies, could slow down the Fed’s rate cut plans.

In December, the personal consumption expenditure (PCE) index, the Fed’s preferred inflation gauge, rose 2.6% from 2.4% in November, in line with market expectations. Personal income and consumer spending rose by 0.4% and 0.7% in December compared to the 0.3% and 0.6% rise, respectively, in the prior month. U.S. economic growth decelerated, as gross domestic product (GDP) increased at a 2.3% annualized rate in Q4 after accelerating at a 3.1% rate in Q3. Growth for the full year came in at 2.8% versus 2.9% in 2023. Market participants are expecting economic growth to stay flat in the second half and inflation to rise. 

Amid the current market conditions, investors looking for higher returns can consider no-load mutual funds like Invesco SteelPath MLP Select 40 Fund (MLPTX Quick QuoteMLPTX - Free Report) ), Fidelity Advisor Semiconductors (FELIX Quick QuoteFELIX - Free Report) ), Invesco Small Cap Value (VSMIX Quick QuoteVSMIX - Free Report) and Fidelity New Millennium Fund (FMILX Quick QuoteFMILX - 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 portfolios 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).

Invesco SteelPath MLP Select 40 Fund 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 Apr. 1, 2010. Most of the fund’s exposure was in companies like Energy Transfer (7.8%), MPLX (7.5%) and Western Midstream (6.6%) as of Aug. 31, 2024.

MLPTX’s three-year and five-year annualized returns are 25.2% and 15.4%, respectively. MLPTX has an annual expense ratio of 0.87%.

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

Fidelity Advisor Semiconductors fund 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. FELIX advisors choose to invest in stocks based on fundamental analysis factors like financial condition and industry position, along with market and economic conditions.

Adam Benjamin has been the lead manager of FELIX since March 16, 2020. Most of the fund’s holdings were in companies like NVIDIA (25.8%), ON Semiconductors (7.3%) and Taiwan Semiconductors (6.1%) as of July 31, 2024.

FELIX’s three-year and five-year annualized returns were 18.1% and 30.2%, respectively. FELIX has an annual expense ratio of 0.71%.

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 Western Alliance Bancorporation (3.6%), Coherent (3.3%) and Lumentum (3.0%) as of July 31, 2024.

VSMIX’s three-year and five-year annualized returns are 17.2% and 19.6%, respectively. VSMIX has an annual expense ratio of 0.86%.

Fidelity New Millennium Fund invests most of its net assets in common stocks of small and medium-sized companies with either growth or value or sometimes both characteristics. FMILX advisors generally invest in companies that may benefit from long-term changes due to technological advances, product innovation, economic plans, demographics, social attitudes, and other factors.

Daniel Sherwood has been the lead manager of FMILX since Oct. 19, 2022. Most of the fund’s exposure is in companies like Microsoft (6.7%), NVIDIA (6.4%) and Apple (5.3%) as of Aug. 31, 2024.

FMILX has three-year and five-year annualized returns of 16.7% and 15.8%, respectively. FMILX has an annual expense ratio of 0.80%.

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