Investors always aim to make the best out of their total invested capital. Although choosing mutual funds with best returns is the principal goal of investors, they also aim to reduce their expenses while buying or selling funds. Due to this reason, no-load funds with low expense ratios are always targeted. In the first quarter, markets registered stable gains, but a weak March remained a concern for investors.
That’s when no-load mutual funds were once again in the limelight. 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.
Further, smooth gains in first quarter lifted investors’ spirits. The three key U.S. indexes, the Dow, the S&P 500 and the Nasdaq climbed 4.6%, 5.5% and 9.8%, respectively, in the first quarter. The Dow registered gains for six straight quarters, marking its longest stretch of gains since the last quarter of 2006. The S&P 500 also posted six consecutive quarterly increases and registered its strongest first-quarter performance since 2013. The tech-based index Nasdaq reported its best quarterly gain since the fourth quarter of 2013.
However, U.S. oil prices recorded the worst quarterly loss of 5.7% in the first quarter of 2017 since late 2015, pressured by oversupply of crude in the global market. The energy sector slumped 7.7% and was the worst performer among the S&P 500 sectors. Uncertainty over President Trump’s implementation of his economic policies also weighed on investor sentiment. Following these uncertainties, no-load funds along with low expense ratio could be a hit among investors, who want to bet on low-cost mutual funds.
Comparative Performance of No-Load Funds
Here, we have compared the average year-to-date (YTD) return of the top 100 no-load funds with the top 100 load funds. Out of the total 5,006 non-load funds, the top 100 funds registered an average YTD return of 14.7%, whereas from 2,047 load funds, the top 100 funds posted an average YTD return of 13.3%.
Moreover, the best performer among the no-load fund category, Rydex NASDAQ-100 2x Strategy H (
RYVYX Quick Quote RYVYX - Free Report) , has YTD and first-quarter returns of 27.6% and 24.5%, respectively. The top load fund, Franklin India Growth A FINGX, has YTD and first-quarter respective returns of 21% and 19.2%. With no-load funds registering comparatively better returns than load funds so far this year and in the first quarter, no-load funds are expected to get more love from investors the ongoing second quarter. Importance of Low Expense Ratio
High operating expenses negatively impact the total value of a mutual fund's assets, which in turn weigh on returns. So, a low expense ratio not only ensures efficient utilization of a fund’s assets, it also leads to encouraging returns for investors. An expense ratio below 0.75% is considered low, whereas any expense ratio above 1.5% is generally considered high.
Here, we have compared two mutual funds, Brandes Separately Managed Account Reserve Trust
SMARX and Oppenheimer SteelPath MLP Select 40 A MLPFX. SMARX has least expense ratio, while MLPFX has the highest expense ratio of 4.91%. Moreover, SMARX hold a Zacks Mutual Fund Rank #1 (Strong Buy) and returned 1% YTD. Meanwhile, MLPFX possess a Zacks Mutual Fund Rank #5 (Strong Sell) and gave a negative return of 0.6% YTD. 5 Zacks Rank #1 No-Load Funds to Buy Now
We have highlighted five no-load mutual funds with an expense ratio lower than 0.75% and flaunting a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging first-quarter returns. Additionally, the minimum initial investment is within $500 and net assets are above $50 million.
We expect these funds to outperform their 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 future success of the fund.
Prudential Jennison Growth Z PJFZX invests a minimum of 65% of its assets in equity securities of companies having market capitalization of over $1 billion. PJFZX primarily focuses on acquiring securities of companies that are believed to have an impressive growth potential. It also invests in securities including common stocks, nonconvertible preferred stocks and convertible securities.
PJFZX has an annual expense ratio of 0.73%, lower than the category average of 1.15%. The fund has first quarter returns of 10.9%.
DFA Emerging Markets Social Core Portfolio DFESX seeks capital appreciation for the long run. DFESX invests the bulk of its assets in common stocks of companies located in emerging markets. These equity securities are defined as Approved Markets securities.
DFESX has an annual expense ratio of 0.63%, lower than the category average of 1.61%. The fund has first quarter returns of 13.9%.
GMO International Developed Equity Allocation III GIOTX seeks return higher than its benchmark, the MSCI EAFE Index. GIOTX is a fund of funds and invest heavily in foreign and emerging markets.
GIOTX has an annual expense ratio of 0.65%, lower than the category average of 1.22%. The fund has first quarter returns of 7.2%.
Hartford Growth Opportunities HLS IA HAGOX seeks capital growth and maintains a diversified portfolio by investing mainly in common stocks of growth-oriented, mid- and large-cap companies. HAGOX may invest not more than 20% of its assets in securities of foreign companies.
HAGOX has an annual expense ratio of 0.65%, lower than the category average of 1.21%. The fund has first quarter returns of 10.2%.
GMO Global Developed Equity Allocation III GWOAX seeks return higher than its benchmark, the MSCI World Index. GIOTX invests a lion’s share of its assets in equity securities of companies based in developed markets. The fund may also invest around 10% of its assets in emerging markets.
GWOAX has an annual expense ratio of 0.55%, lower than the category average of 1.09%. The fund has first quarter returns of 7.3%.
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