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5 Best Performing No Load Mutual Funds of Q3 2017

All the key indexes touched record highs during the third quarter, with both the Dow and the S&P 500 posting their eighth straight quarter of gains. While the Dow posted its best quarterly winning streak since 1997, the S&P 500 registered its best stretch of quarterly rise since its inception. A significant jump in tech stocks, meanwhile, boosted the tech-laden Nasdaq, which registered its 50th record close of this year on the last trading day of the quarter. The index also posted its fifth straight positive quarter since 2015.

Investors interested in scooping up strong returns while the optimism lasts with flock to index funds. Then again, the more astute investors will also consider reducing their expenses while buying or selling funds to make the most of this market. For them, no-load mutual funds should do the trick.

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 these do not carry the entry or exit burden like management funds do. It comes as no surprise then that no-load funds have managed to provide better returns than their load peers so far this year.

Benchmarks Touch Record Highs

Benchmarks managed to close at record highs despite rising tensions between the United States and North Korea as well as the adverse impact of hurricanes. Solid second-quarter earnings results and steady economic growth helped stocks to rally, while optimism over Trump’s tax overhaul made small caps strong investment choices. The small-cap Russell 2000 index also hit record high levels in the aforesaid quarter.

Small caps bounced back on renewed hope that key Republican congressional leaders and President Trump’s top associates are working on a tax reform framework. Further, new proposals related to the full expensing for small-cap companies are likely. These proposals aim to extend deductions on investments made by small businesses on new facilities and equipment. (Read More: 5 Best-Performing Mutual Funds of Q3)

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 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 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.

Comparative Analysis of No-Load Funds

Here, within the top-ranked no-load fund category, Matthews China Investor (MCHFX) has no front or back-end sales loads. The best-rated load fund Fidelity Advisor Technology A (FADTX) has a sales load of 5.75.

Moreover, we have compared the average year-to-date (YTD) returns of the top 100 no-load funds with the top 100 load funds. Out of the total 824 Zacks Rank #1 (Strong Buy) non-load funds, the top 100 registered average YTD returns of 31.6%, whereas from 262 Zacks Rank #1 load funds, the top 100 posted average YTD returns of 25.1%. 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 final quarter of this year.

5 Top-Ranked No-Load Funds to Buy Now

Here, we have highlighted five no-load mutual funds flaunting a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging third-quarter and 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 seeks capital growth over the long run. FSPTX 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. Factors including financial strength and economic condition are considered before investing in a company.

FSPTX has an annual expense ratio of 0.76%, which is below the category average of 1.44%. The fund has third-quarter and YTDreturns of 10.3% and 45.8%, respectively.

Putnam Global Technology Y PGTYX seeks growth of capital over the long run. PGTYX invests a major portion of its assets in securities of companies involved in operations related to the technology domain. PGTYX uses a blend strategy to invest in common stocks of companies. The fund primarily invests in securities of large- and mid-cap companies.

PGTYX has an annual expense ratio of 1.03%, which is below the category average of 1.44%. The fund has third-quarter and YTDreturns of 10.1% and 41.8%, respectively.

VanEck Emerging Markets Y EMRYX seeks capital growth for the long run by investing mainly in equity securities of emerging markets. The fund focuses primarily on those companies that maintain more than half of their assets in emerging markets.

EMRYX has an annual expense ratio of 1.10%, which is below the category average of 1.43%. The fund has third-quarter and YTDreturns of 10.4% and 43.7%, respectively.

American Century Emerging Markets Investor TWMIX seeks appreciation of capital. TWMIX invests heavily in equity securities of companies based in emerging markets. The fund generally invests in foreign currencies-denominated equity securities.

TWMIX has an annual expense ratio of 1.38%, which is below the category average of 1.43%. The fund has third-quarter and YTDreturns of 12.9% and 41.6%, respectively.

Vanguard International Growth Investor VWIGX invests predominantly in the stocks of companies located outside the United States and is expected to diversify its assets in countries across developed and emerging markets. The fund focuses mainly on those companies that have above-growth potential.

VWIGX has an annual expense ratio of 0.46%, which is below the category average of 1.20%. The fund has third-quarter and YTDreturns of 10.6% and 39%, respectively.

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