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For young graduates, paying off that vast student loan is a rather unpleasant aftertaste following the completion of their studies. But with the right financial planning, closing the overwhelming debt isn’t difficult. In this respect, young investors, eager to pay off their student loans, should consider adding mutual funds to their portfolio.
Successfully Investing to Unload a Student Loan
Strategies to build wealth in order to pay off a loan may vary from income requirements to interest charged on the student loan to how much one can put into a mutual fund.
To begin with, young investors should evaluate their student loan interest rate. Student loans are tax deductible, however, one would need to pay taxes as well. However, tax advantage does reduce the amount. Second, investors should invest in those mutual funds whose returns are higher than the interest they are charged on the student loan.
What makes mutual funds such a lucrative option in this case is the fact that one can choose from a vast number of investment options. Also, mutual funds are a great way to shield one’s money against market volatility since the investments are across diverse asset classes.
Therefore, in order to build wealth steadily, investors could purchase mutual funds that invest in companies with high potential for growth. One could also consider allocation-balanced mutual funds, which invest in a diverse pool of equities and other investment instruments.
Growth mutual funds are best suited for young investors who seek long-term capital gains. These funds invest in growth companies, which grow faster than any average firm and are keen on expanding their operations faster. Growth firms usually reinvest their profits in the business rather than pay out dividends, which boosts a company’s growth prospects.
4 Funds to Build a Great “Pay-Off Debt” Portfolio
We have, therefore, selected four mutual funds that abide by the aforementioned criteria. All these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) and have encouraging year-to-date returns. Additionally, the minimum initial investment is within $5,000.
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.
Brown Advisory Flexible Equity Fund Advisor Shares (BAFAX - Free Report) aims for long-term capital growth. The fund invests the majority of its assets in a diversified portfolio of equity securities. The fund may also invest a minor part of its assets in securities of foreign issuers.
This Zacks sector – Allocation Balanced product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
BAFAX has an annual expense ratio of 0.98%, which is below the category average of 1.08%. It has returned 21.8% on a year-to-date basis. BAFAX has a minimum initial investment of $100.
Hartford Balanced HLS Fund Class IA (HADAX - Free Report) aims for total return over the long term. The fund invests the majority of its assets in equity securities of all companies across all market capitalizations and a minority of it in debt securities and cash instruments. The fund focuses more on large-capitalization companies whose market capitalizations are similar to those on the S&P 500 Index.
This Zacks sector – Allocation Balanced product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
HADAX has an annual expense ratio of 0.63%, which is below the category average of 0.82%. It has returned 15.3% on a year-to-date basis. HADAX has no minimum initial investment.
MFS Growth Fund Class A (MFEGX - Free Report) primarily invests in equity securities of companies and seeks capital appreciation. The fund invests in stocks of those companies that the fund manager believes to have more than average potential for growth.
This Zacks sector – All Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
MFEGX has an annual expense ratio of 0.92%, which is below the category average of 1.08%. It has returned 26.6% on a year-to-date basis. MFEGX has a minimum initial investment of $1000.
BlackRock Advantage Small Cap Growth Fund Investor A (CSGEX - Free Report) aims for capital growth. The fund invests the majority of its assets in equity securities of small-capitalization growth companies. The fund invests in securities of issuers mostly located in the United States.
This Zacks sector – Small Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
CSGEX has an annual expense ratio of 0.75%, which is below the category average of 1.22%. It has returned 18.2% on a year-to-date basis. CSGEX has a minimum initial investment of $1000.
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Top Mutual Funds to Pay Off a College Loan
For young graduates, paying off that vast student loan is a rather unpleasant aftertaste following the completion of their studies. But with the right financial planning, closing the overwhelming debt isn’t difficult. In this respect, young investors, eager to pay off their student loans, should consider adding mutual funds to their portfolio.
Successfully Investing to Unload a Student Loan
Strategies to build wealth in order to pay off a loan may vary from income requirements to interest charged on the student loan to how much one can put into a mutual fund.
To begin with, young investors should evaluate their student loan interest rate. Student loans are tax deductible, however, one would need to pay taxes as well. However, tax advantage does reduce the amount. Second, investors should invest in those mutual funds whose returns are higher than the interest they are charged on the student loan.
What makes mutual funds such a lucrative option in this case is the fact that one can choose from a vast number of investment options. Also, mutual funds are a great way to shield one’s money against market volatility since the investments are across diverse asset classes.
Plus, reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Therefore, in order to build wealth steadily, investors could purchase mutual funds that invest in companies with high potential for growth. One could also consider allocation-balanced mutual funds, which invest in a diverse pool of equities and other investment instruments.
Growth mutual funds are best suited for young investors who seek long-term capital gains. These funds invest in growth companies, which grow faster than any average firm and are keen on expanding their operations faster. Growth firms usually reinvest their profits in the business rather than pay out dividends, which boosts a company’s growth prospects.
4 Funds to Build a Great “Pay-Off Debt” Portfolio
We have, therefore, selected four mutual funds that abide by the aforementioned criteria. All these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) and have encouraging year-to-date returns. Additionally, the minimum initial investment is within $5,000.
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.
Brown Advisory Flexible Equity Fund Advisor Shares (BAFAX - Free Report) aims for long-term capital growth. The fund invests the majority of its assets in a diversified portfolio of equity securities. The fund may also invest a minor part of its assets in securities of foreign issuers.
This Zacks sector – Allocation Balanced product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
BAFAX has an annual expense ratio of 0.98%, which is below the category average of 1.08%. It has returned 21.8% on a year-to-date basis. BAFAX has a minimum initial investment of $100.
Hartford Balanced HLS Fund Class IA (HADAX - Free Report) aims for total return over the long term. The fund invests the majority of its assets in equity securities of all companies across all market capitalizations and a minority of it in debt securities and cash instruments. The fund focuses more on large-capitalization companies whose market capitalizations are similar to those on the S&P 500 Index.
This Zacks sector – Allocation Balanced product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
HADAX has an annual expense ratio of 0.63%, which is below the category average of 0.82%. It has returned 15.3% on a year-to-date basis. HADAX has no minimum initial investment.
MFS Growth Fund Class A (MFEGX - Free Report) primarily invests in equity securities of companies and seeks capital appreciation. The fund invests in stocks of those companies that the fund manager believes to have more than average potential for growth.
This Zacks sector – All Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
MFEGX has an annual expense ratio of 0.92%, which is below the category average of 1.08%. It has returned 26.6% on a year-to-date basis. MFEGX has a minimum initial investment of $1000.
BlackRock Advantage Small Cap Growth Fund Investor A (CSGEX - Free Report) aims for capital growth. The fund invests the majority of its assets in equity securities of small-capitalization growth companies. The fund invests in securities of issuers mostly located in the United States.
This Zacks sector – Small Cap Growth product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
CSGEX has an annual expense ratio of 0.75%, which is below the category average of 1.22%. It has returned 18.2% on a year-to-date basis. CSGEX has a minimum initial investment of $1000.
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 >>