3 Dirt Cheap Mutual Funds to Buy Now - Best of Funds


The choice of which mutual fund to invest in is determined by several parameters. These include the assets under management, the manner in which these assets are allocated and the profile of the fund manager. The fund manager's profile reveals much about how the fund could be managed, since past track record reflects the probable management style.

The Expense Ratio
One of the most important parameters used while selecting a fund is the expense ratio. This parameter is calculated by dividing operating expenses by the assets under management. These expenses include operating and administrative costs and 12 b-1 fees. The largest portion of these expenses is attributable to the fees paid to the fund managers or investment advisors.
The daily net asset value of a fund is determined after deducting such expenses. Costs incurred while buying and selling securities for the fund's portfolio as well as sales charges are not part of the expense ratio. Lower index ratios are of particular significance in case of index funds, which are passively managed, as well as debt funds, since returns are much lower than their equity counterparts.
The quantum of assets under management is an important factor when determining the expense ratio. If the amount assets of a mutual fund are small, the expense ratio is higher since expenses have to be met from a restricted asset base. On the other hand, if the asset base is larger, the expense ratio declines since expenses can be met from a higher quantum of assets.

Below we are presenting three mutual funds, each of which have a low expense ratio and have high returns, as well as a  Zacks Rank #1(Strong Buy).

Mutual Fund Picks

DFA US Large Cap Value III (DFUVX)

Launched in February 1995, this fund has an expense ratio of 0.14% and net assets of $2.45 billion. It is a feeder fund and invests all its assets in the DFA International Value Series, the master fund. The International Value Portfolio focusses on purchasing securities issued by foreign large companies from mature markets, which the fund advisor believes are value stocks.
The mutual fund holds 238 securities in all. Its top 10 holdings make up 32.07% of its assets. Its top 3 holdings are Bank of America Corporation (BAC), Citigroup, Inc. (C) and AT&T, Inc. (T). The fund returned 30.45% over the last one year period and has a Zacks Rank #1(Strong Buy).

Vanguard Health Care Index (VHCIX)

This is fund has also has an expense ratio of 0.14% and net assets of $2.16 billion. Launched in February 2004, the fund seeks to mimic the performance of the MSCI US Investable Market Index (IMI)/Health Care 25/50. The index consists of domestic companies of all sizes from the healthcare sector. It is a non-diversified fund
This fund holds a total of 294 securities. It is concentrated around its top 10 holdings, which account for 47.56% of its assets. Its top three assets are Johnson & Johnson (JNJ), Pfizer Inc. (PFE) and Merck & Co. Inc. (MRK). The fund returned 29.95 % over the last one year period and has a Zacks Rank #1(Strong Buy).

Emerald Banking and Finance A (HSSAX)

Launched in February 1997, this fund is a much smaller fund with net assets of around $71 million. The fund has an impressive expense ratio of only 0.01%. It invests the lion's share of its assets in stocks issues by banking and financial services companies. It focusses on investing in relatively smaller companies whose market cap is lower than $1.5 billion.

The fund is widely diversified and has a total number of 119 assets. The asset it is most invested in is Bank of the Ozarks, Inc. (OZRK). which makes up 4.09% of its assets. The next two, Independent Bank Group, Inc. (IBTX) and SVB Financial Group (SIVB), together make up 4.79% of its assets. The fund returned 26.27% over the last one year period and has a Zacks Rank #1(Strong Buy).
Funds with a lower expense ratio provide relatively higher returns because they manage their costs better. This is why these mutual funds would make excellent additions to your portfolio.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Mutual Funds

Referenced Stocks: BAC , C , DFUVX , T , VHCIX



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