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3 Top No-Load Mutual Funds to Invest in for Solid Returns
Zacks Equity Research
5 min read
With inflation running hot and rate hike in the cards, things are certainly not looking promising for the U.S. economy at the moment. In fact, recession fears are mounting, resulting in a lot of gyration in the stock market. Amid all these bottlenecks, investing in mutual funds that charge high fees can easily burn a hole in your pocket. Instead, investors can opt for no-load mutual funds as of now since one can buy or sell such passively managed funds without bearing any commission fees, or any other charges 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 the shares are distributed directly by the investment company, instead of any third-party involvement like broker, advisor, or another type of professional. 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.
The load charges are generally within the range of 0-6%. To understand the math, let’s assume an investor wants to invest$10000 in a mutual fund that has a 5% entry and exit load. Then, $ 9500 [$10000 - $500 (5% of $10000)] is left with the mutual fund house to invest. Now, let’s assume the fund has given 15% return over the year. So, the current value of the portfolio is $10925 [$9500+ $1425 (15% of $9500)]. Now, when an exit load of 5% is applied, the investor is left with $10378.75 [$10925-$546.25 (5% of $10925)].
According to the above hypothesis, the return earned by the investor with front and back load is 3.78%, whereas he could have enjoyed a much higher return without load.
Wise investors looking for higher returns can consider no-load mutual funds as it has a low expense ratio, which can translate into higher returns along with other factors like the fund’s performance history, investment style, risk tolerance, etc.
We have thus selected three 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. 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 Advisor Semiconductors Fund FELIX invests most of its net assets in common stocks of domestic and foreign companies that are principally engaged in the design, manufacture, or sale of semiconductors and semiconductor equipment. FELIX 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 FELIX since Dec 27, 2000. Most of the fund’s exposure is in sectors such as Technology, Other and Retail Trade as of 5/31/2022.
FELIX’s three-year and five-year annualized returns are nearly 36.7% and 24.1%, respectively. FELIX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.75%, which is less than the category average of 1.05%.
To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
BNY Mellon Natural Resources Fund Class I DLDRX invests most of its assets along with borrowings, if any, in common stocks of domestic and foreign natural resources and natural resources-related sectors companies irrespective of the market capitalization. DLDRX also invests in emerging markets securities with similar economic characteristics.
Albert Chu has been the lead manager of DLDRX since Oct 30, 2019, and most of the fund’s exposure is in sectors such as Energy, Industrial Cyclical and Non-Durable as of 5/31/2022.
DLDRX’s three-year and five-year annualized returns are 34.3% and 18.9%, respectively. DLDRX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.91%, which is less than the category average of 1.11%.
Columbia Seligman Technology and Information Fund CCIZX invests most of its net assets in securities of companies that do business in the field of information technology and communications services sectors as well as other related industries. CCIZX also invests a small portion of its net assets in foreign investments.
Paul H. Wick has been the lead manager of CCIZX since Jan 1, 1990, and most of the fund’s exposure is in sectors such as Technology, Other and Services as of 5/31/2022.
CCIZX’s three-year and five-year annualized returns are 29.6% and 20.3%, respectively. CCIZX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.92% compared to the category average of 1.05%.
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