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5 Best-Performing No-Load Mutual Funds of First-Half 2018


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Out of the three major benchmarks, the S&P 500 and the Nasdaq posted positive performances during the first half of 2018, while the Dow ended in the red. Continued tariff-related tensions between the United States and its key trade partners weighed on investors' sentiment.

Given the negative outlook, no-load mutual funds have once again grabbed 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.

Mixed Performance in First-Half 2018

In the first half of the year, the Dow declined 1.8%, while the S&P 500 and the Nasdaq increased 1.7% and 8.8%, respectively.  

After an outstanding 2017, markets touched record highs in January. However, the joyride came to a halt in next few months, when Trump announced his plans to impose trade tariffs on foreign imports.

Looming trade war tensions between the United States and once allies Canada and Mexico, and other major economies like the European Union and China made investors nervous and led to huge selloffs.

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 ultimate fund value.

Comparative Analysis of No-Load Funds

Here, among the top-ranked no-load fund category, Berkshire Focus (BFOCX) has no front or back sales loads and returned 19.8% in the first half of this year. The best-rated load fund Morgan Stanley Institutional Mid Cap Growth A (MACGX) has sales load of 5.25 and returned 18.6% in the first half of 2018.

Moreover, we have compared the average year-to-date (YTD) returns of the top 150 no-load funds with the top 150 load funds. Out of the total 622 Zacks Rank #1 (Strong Buy) non-load funds, the top 150 registered average YTD returns of 10.1%, whereas from 221 Zacks Rank #1 load funds, the top 150 posted average YTD returns of 4.9%. 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 coming months.

5 Zacks Rank #1 No-Load Fund to Buy Now

We have highlighted five no-load mutual funds flaunting a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging first half 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.

PRIMECAP Odyssey Aggressive Growth POAGX seeks to provide long-term capital appreciation. POAGX invests primarily in the common stocks of United States companies, especially those with prospects for rapid earnings growth. The fund may also invest in common stocks of companies from different market sectors.

POAGX carries an expense ratio of 0.64% compared with the category average of 1.24%. Moreover, POAGX requires minimal initial investment of $2,000. The fund has first-half returns of 14.3%. Further, Theo A. Kolokotrones is one of the fund managers of POAGX since 2004.

Deutsche Science and Technology S  KTCSX seeks capital growth. KTCSX invests a large chunk of its assets in common stocks of companies from the science and technology sector. Although the fund invests mainly in domestic companies, it also invests around 35% of its assets in non-UNITED STATES companies.

KTCSX carries an expense ratio of 0.81% compared with the category average of 1.44%. Moreover, KTCSX requires minimal initial investment of $2,500. The fund has first-half returns of 13.4%. Further, Daniel J. Fletcher is one of the fund managers of KTCSX since 2017.

AB Discovery Growth Advisor  CHCYX 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.

CHCYX carries an expense ratio of 0.76% compared with the category average of 1.24%. Moreover, CHCYX requires minimal initial investment of $0. The fund has first-half returns of 14.3%. Further, Bruce K. Aronow is one of the fund managers of CHCYX since 2008.

Matthews China Small Companies  MCSMX seeks appreciation of capital for the long run. The fund attains its investment goals by investing primarily in preferred and common stocks of small-cap companies based in China.

MCSMX carries an expense ratio of 1.50% compared with the category average of 1.69%. Moreover, MCSMX requires minimal initial investment of $2,500. The fund has first-half returns of 13.4%. Further, Tiffany Hsiao is one of the fund managers of MCSMX since 2015.

Fidelity Select Health Care Portfolio FSPHX seeks capital appreciation by and is managed by Fidelity Group. The fund normally invests a bulk of 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. 

FSPHX carries an expense ratio of 0.73% compared with the category average of 1.35%. Moreover, FSPHX requires minimal initial investment of $2,500. The fund has first-half returns of 12.6%. Further, Edward L. Yoon is the fund manager of FSPHX since 2008.

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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 Nasdaq, Inc.



This article appears in: Investing , Mutual Funds
Referenced Symbols: FSPHX , POAGX , KTCSX , CHCYX , MCSMX


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