No-load funds are sold without a commission or sales charge.
The best no-load mutual funds might be considered a free lunch for investors. In the past, most mutual funds incurred large commissions and fees when shares were bought and sold. As the industry evolved and competition tightened, investors benefited as the universe of no-load mutual funds expanded. In most cases, investors buy no-load funds directly from the issuing investment company or a large investment firm like Fidelity, Schwab or Vanguard. Ultimately, the less you pay in fees, the more money you have to invest for future portfolio growth. Here are some of the best no-load mutual funds.
Vanguard Total Stock Market Index Fund Admiral Shares (ticker: VTSAX)
This fund covers the entire U.S. stock market, making it ideal as a core equity holding, says Brandon Renfro, assistant professor of finance at East Texas Baptist University. Just add a bond fund and an international equity holding and you have a completely diversified investment portfolio. "Even if you want to tilt your portfolio toward a given market-cap or sector, you can still use VTSAX as a core holding," Renfro says. This total stock market fund owns nearly 3,600 stocks from the large-, mid-, and small-cap universe. The fund closely tracks the CRSP US Total Market Index. The top holdings include well-known names like Microsoft Corp. (MSFT), and JPMorgan Chase & Co. (JPM), to name a few. Like its benchmark, the stocks in the fund average an 11% earnings growth rate and a 21.9% price-to-earnings ratio.
Vanguard Value Index Admiral Fund (VVIAX)
"Over the long run, research shows that on average value stocks outperform growth stocks," says Robert Johnson, professor of finance at Creighton University. Despite average annual returns from 1926 through 2018 of 11% for large-cap value stocks versus 9.2% large-cap growth stock returns, there are extended periods when growth stocks outperform value. Many analysts are predicting a return to value after growth stocks recent run-ups. The fund invests in large-cap U.S. companies that may be temporarily undervalued. With a low 0.05% expense ratio and a current yield of 2.61%, investors seeking dividends and growth potential might consider this no-load index fund.
Vanguard 500 Index Fund (VFIAX)
The financial industry's first index fund for individual investors, this S&P 500 fund is a low-cost path to a diversified portfolio of U.S. stocks. This fund covers most industries and spans 75% of the U.S. stock market. VFIAX is best-suited for investors with a moderate risk tolerance who are looking to buy and hold, with a position in the U.S. equities markets, experts say. The fund closely tracks its S&P 500 benchmark, with a 2019 return of 31% and a 10-year average of roughly 13%. This could be a core holding for any investment portfolio. The 0.04% expense ratio is among the lowest available. While the 1.83% yield offers modest cash flow.
Baird Aggregate Bond Fund (BAGIX)
This actively managed no-load bond fund is among the top-rated funds of its class. With Baird Fund's chief investment officer Mary Ellen Stanek at the helm and five additional experienced managers on the team, the fund is known for thorough research. The fund includes predominantly investment-grade corporate credit, securitized debt and U.S. government bonds. These sectors mirror those of the Bloomberg Barclays U.S. Aggregate Bond Index. The intermediate-term fund claims a duration of 5.78, which equates to the average term of all the bonds. The holdings breakout includes a mix of government, corporate and securitized bonds. The relatively low expense ratio of 0.3% and its current yield of 2.35%, makes this a core holding for high-net-worth investors. The minimum initial investment is $25,000.
Fidelity Contrafund Fund (FCNTX)
Founded in 1967, Contrafund has beaten the S&P 500 during the past three, five and 10 years, no easy feat. Run by William Danoff since 1990, this large-cap, diversified, actively managed fund strives for sustained, above-average earnings growth of undervalued companies. The fund is 92% invested in the U.S., with a smattering of international holdings. Contrafund deviates from the market weightings of the S&P 500 with its largest holdings in information technology, communication services, health care, financials and consumer discretionary sectors. The fund's 0.82% expense ratio has proven to be worth the fee. For investors seeking a no-load mutual fund led by a renowned manager, Contrafund is worth considering.
Fidelity Real Estate Income Fund (FRIFX)
For those who don't own investment real estate, the Fidelity Real Estate Income Fund can augment a diversified no-load mutual fund portfolio. The fund's goal is above-average income and capital growth. The fund owns various commercial real estate securities such as common stock, preferred stock, corporate bonds and commercial mortgage-backed securities. The current allocation is mainly domestic equities and bonds. The fund's securities reflect a range of credit quality from U.S. government bonds to unrated assets. FRIFX top holdings include diverse public real estate investment trusts. Despite the 0.75% expense ratio, the zero minimum investment requirement and 3.87% yield make this real estate fund one to consider.
Fidelity Mid Cap Index Fund (FSMDX)
For investors seeking a balance between the widely held S&P 500 and the riskier small-cap universe, this mid-cap index fund is a great way to gain low-cost exposure to mid-sized companies who have proven their worth. Founded in 2011, FSMDX tracks the returns of the Russell Midcap Index. Since, inception, this fund handily outperformed the mid-cap blend category. The top holdings are less well-known firms such as Dollar General (DG) and Sempra Energy (SRE). The top sectors mirror those of the Russell Midcap Index: information technology, industrials, financials, consumer discretionary, health care and real estate. The minuscule 0.025% expense ratio adds to this no-load index fund's allure. Finally, the one-, three- and five-year returns are 30.51%, 12.03% and 9.33%, respectively.
Schwab International Index Fund (SWISX)
A no-load mutual fund portfolio would be incomplete without a broad international stock fund. This Schwab fund is a sound core holding, with better returns than the category average since 2010. Among the safer international fund choices, this large-cap international fund tracks the holdings of publicly traded non-US companies in developed markets. The largest proportion of stocks come from Japan, the United Kingdom, France, Switzerland, Germany, Australia and the Netherlands. Investors might consider augmenting this no-load mutual fund with an emerging markets offer as well. This no-load fund has a 0.06% expense ratio, $1 minimum investment and a 3.09% distribution yield.
Best no-load mutual funds:
-- Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
-- Vanguard Value Index Admiral Fund (VVIAX)
-- Vanguard 500 Index Fund (VFIAX)
-- Baird Aggregate Bond Fund (BAGIX)
-- Fidelity Contrafund Fund (FCNTX)
-- Fidelity Real Estate Income Fund (FRIFX)
-- Fidelity Mid Cap Index Fund (FSMDX)
-- Schwab International Index Fund (SWISX)
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