U.S. Markets closed

5 Best No-Load Mutual Funds of Q1

Nitish Marwah

In the first quarter of 2019, the Dow, the S&P 500 and the Nasdaq rallied 11.2%, 13.1% and 16.5%, respectively. This marked the S&P 500’s best quarterly rise since the third quarter of 2009. Global economic woes and fears related to Brexit weighed on investors.

Given the negative outlook, no-load mutual funds are once again in the spotlight. 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.

This implies that they do not carry the burden of management funds unlike funds with entry or exit loads. It comes as no surprise that no-load funds have managed to provide better returns over their load peers so far this year.

IMF Lowers Global Growth Projections for 2019

On Apr 9, the International Monetary Fund (IMF) reduced its global growth forecast for this year once again. The international lending agency believes that factors such as monetary tightening by the Federal Reserve and trade conflicts could impede global growth in the days to come.

The IMF lowered the 2019 growth forecast to 3.3% from 3.5%, its lowest projection since the financial crisis and the third downgrade in the past six months.

Speaking at a news conference in Washington, the IMF chief economist Gita Gopinath stated that this was a “delicate moment for the global economy.” The IMF is of the view that global stimulus measures is the need of the hour and would go a long way in safeguarding the economies across the globe from shocks of an inevitable downturn. Furthermore, the economist believes that that a dovish monetary approach would also be needed to counter the slowdown.

According to the IMF, weakness in developed economies, including leading members of the EU would contribute the most to a global meltdown.

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 the ultimate fund value.

5 Best Fund Choices

Given such circumstances, we have highlighted five no-load mutual funds. These funds also carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.

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.

The question here is: why should investors consider mutual funds? 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).

AB Discovery Growth Advisor CHCYX fund seeks capital growth for the long run. CHCYX maintains a diversified portfolio by investing in equity securities of small- and mid-cap companies. For the fund’s investment purpose, those small- and mid-cap companies that are chosen come within the market-cap range of lowest 25% of the overall UNITED STATES equity market.

This Sector – Mid Cap Blend product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 19.6% and 10.7%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

CHCYXhas a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.72%, which is below the category average of 1.19%.

Wells Fargo CoreBuilder Shares Series M WFCMX fund seeks maximization of returns through growth of income and capital. WFCMX invests more than 60% of its assets in municipal securities, which offer federal income tax exempted interest.

This Sector – Govt Mtge-Intermediate product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 3.7% and 4.8%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

WFCMXhas a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.00%, which is below the category average of 0.75%.

Fidelity Select Health Care Portfolio FSPHX fund seeks capital appreciation by and is managed by Fidelity Group. The fund normally invests a bulk of its assets in common stocks of companies principally engaged in the design, manufacture or sale of products or services used for or in connection with health care or medicine.

This Sector – Health product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 14.6% and 11.2%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FSPHXhas a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.73%, which is below the category average of 1.26%.

Fidelity Select Medical Equipment and Systems Portfolio FSMEX fund invests the bulk of its assets in securities of companies that focus on research, development, manufacture, distribution, supply or sale of medical equipment and devices and related technologies. The fund invests in securities of U.S. and non-U.S. companies.

This Sector – Health product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 22.9% and 18.1%, respectively.

FSPHXhas a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.76%, which is below the category average of 1.26%.

Fidelity Balanced Fund FBALX aims for income and capital growth that is on par with reasonable risk. The fund usually invests the majority of its assets in stocks and other equity securities and the rest in bonds and other debt securities.

This Zacks sector – Allocation Balanced product has a history of positive total returns for more than 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 9.8% and 7.5%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FBALXhas a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.53%, which is below the category average of 0.82%.

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 >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Get Your Free (WFCMX): Fund Analysis Report
 
Get Your Free (FSMEX): Fund Analysis Report
 
Get Your Free (FBALX): Fund Analysis Report
 
Get Your Free (FSPHX): Fund Analysis Report
 
Get Your Free (CHCYX): Fund Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research