Back to top

Mutual Fund Commentary

Read Full ArticleHide Full Article

Recent domestic and international tensions are expected to weigh on investor sentiment in near terms. In this context, no-load mutual funds are back in the spotlight. Investors always aim to make the best out of the total invested capital. So investing in mutual funds with strong returns is always the primary objective. However, investors also aim to reduce their expenses while buying or selling funds by focusing on no-load mutual funds.

Domestic and International Tensions Persist

Current tensions in global and domestic markets have made investors jittery. Recently, in his testimony to the Senate, U.S. Attorney General Jeff Sessions said that his meeting with Russians to hamper the 2016 U.S. Presidential election is nothing more than a ‘detestable lie.’ This in turn raised worries over President Trump’s ability to implement his future pro-growth policies, in case Sessions’ testimony lugged along any shocking revelation.

Also, overvaluation concerns in tech sector weighed on investor sentiment. Goldman Sachs (GS - Free Report) warned investors in a note that there are multiple potential unaccounted for dangers in the tech sector, which caused an industry-wide selloff recently.

In Britain, the inability of Prime Minister Theresa May’s Conservative party to secure a majority in the general election added to investors’ woes. Also, in its meeting last week, the European Central Bank (ECB) held interest rates at 0.0% and ruled out possibilities of additional rate cuts. Given such dissuading events, no-load funds could be a hit among investors.

Why Invest In No-Load Funds?

No-load funds are those that do not bear any sales or commission charge at the time of buying or selling funds. This generally happens when funds are traded directly through the investment company and not through some secondary entity. Sales load is normally divided into front end sales load and back end sales load.

Front End Sales Loads: These are fees that an investor must pay at the time of investment. Also, categorized as “Sales Charge (Load) on Purchases”, these are charges an investor pays while purchasing a fund. The front-end sales load is deducted from the actual invested amount, and the remaining portion is actually used to buy funds.

Back-End Sales Loads: These are fees that an investor must pay while selling the investments. Categorized as the “Deferred Sales Charge (Load)", these fees are deducted while redeeming fund shares. The advantage of back-end sales load over front-end sales load is that the entire capital (minus other charges) is invested at the time of purchases. The sales load here is calculated off the initial investment made and not based on ultimate fund value.

Comparative Analysis of No-Load Funds

Here, among the top no-load fund category, Oppenheimer Global Opportunities Y (OGIYX - Free Report) has no front or back sales loads. The top-load fund Oppenheimer Global Opportunities A (OPGIX - Free Report) has sales load of 5.75.

Moreover, 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 784 Zacks Rank #1 (Strong Buy) non-load funds, the top 100 funds registered an average YTD return of 12.9%, whereas from 277 Zacks Rank #1 load funds, the top 100 funds posted an average YTD return of 9.8%. With no-load funds registering comparatively better returns than load funds so far this year, no-load funds are expected to get more love from investors in the coming months.

5 Zacks Rank #1 No-Load Funds to Buy Now

We have highlighted five no-load mutual funds flaunting a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging YTD returns. Additionally, the minimum initial investment is within $5000 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.

Fidelity Select Technology (FSPTX - Free Report) invests a large chunk of its assets in common stocks of companies primarily involved in production, development and sale of products used for technological advancement. The fund invests in both U.S. and non-U.S. companies. FSPTX returned 30.2% so far this year.

Oppenheimer Global Opportunities R (OGINX - Free Report) invests primarily in equity securities of companies based in both domestic and foreign nations. It may also invest around one-fourth of its assets in high yield bonds. OGINX returned 24.6% so far this year.

Matthews China Investor (MCHFX - Free Report) invests the major portion of its assets in preferred and common stocks of companies based in China and Hong Kong. The fund seeks appreciation of capital for the long run. MCHFX returned 28.3% so far this year.

T Rowe Price Global Technology (PRGTX - Free Report) invests a bulk of its assets throughout the world in the common stocks of companies that derive their revenues from the development, advancement, and use of technology. The fund invests in a minimum of 5 countries and a minimum 25% of its assets are invested in foreign companies. PRGTX returned 29.5% so far this year.

Columbia Select Large Cap Growth Z (UMLGX - Free Report) invests a lion’s share of its assets in equity securities of both domestic and foreign companies, which fall within the range of the Russell 1000 Growth Index. UMLGX returned 23.2% so far this year.

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 >>