Actively managed mutual funds typically carry higher fees and expenses than index funds and exchange-traded funds (ETFs), explaining why passive products have long been stealing market share from active funds.
Another cost irritant associated with some active mutual funds is the load. A mutual fund load is real nuisance because it is a charge that goes to compensate a middleman, someone in between the investor and the fund issuer. Like any other fee, mutual fund loads can be drags on investor outcomes, which is never a positive thing.
Given the peskiness and, arguably, lack of necessity associated with loads, it is easy to understand why investors who like mutual funds really like no-load funds. While many no-load mutual funds still carry higher costs than passively managed ETFs and index funds, the good news is that saving on loads enhances investors’ returns.
Here are some no-load mutual funds to consider.
American Century High-Yield Municipal Fund Investor Class (ABHYX)
Expense Ratio: 0.6% per year, or $60 on a $10,000 investment.
The American Century High-Yield Municipal Fund Investor Class (MUTF:ABHYX) requires a minimum investment of $5,000, but at least this is a no-load mutual fund and its expenses are below those found in the category average.
This fund focuses on high-yield municipal debt and is “designed to provide shareholders with a high level federal tax-free income while maintaining low exposure to the Alternative Minimum Tax (AMT),” according to the issuer.
ABHYX has a portfolio turnover of 49%, a 30-day SEC yield of 3.27% and a trailing-12-month yield of 3.8%. The fund’s average duration is 5.5 years and about half its holdings are rated A, BBB or BB.
Fidelity Balanced Fund (FBALX)
Expense Ratio: 0.53%
Fidelity has long been a giant in the world of actively managed mutual funds, but the firm has recently been asserting its dominance in the passive spaces, even offering several no-fee index funds and some of the cheapest ETFs on the market. Part of Fidelity’s low-cost push has been to eliminate minimum investments, so not only is the Fidelity Balanced Fund (MUTF:FBALX) a no-load mutual fund, it does not have minimum investment, either.
This no-load mutual fund has been around for nearly 34 years and has low expenses compared to the category average, a better return profile and a five-star Morninstar rating.
As a balanced fund, FBALX holds both stocks and bonds. Its equity lineup is considered large-cap blend, but has often leaned toward large-cap growth. The technology and healthcare sectors combine for about 33% of FBALX’s equity lineup.
FBALX’s bond roster spans more than 10 fixed-income categories, including Treasuries, investment-grade corporate debt and junk bonds.
Vanguard Equity Income Investor Shares (VEIPX)
Expense Ratio: 0.27%
Just by the name, you should expect the Vanguard Equity Income Investor Shares (MUTF:VEIPX) to be a no-load mutual fund because Vanguard is a low-cost leader. Vanguard funds are among the industry’s least expensive, and loads are not in the issuer’s language.
Because VEIPX “typically invests in companies that are dedicated to consistently paying dividends, it may have a higher yield than other Vanguard stock mutual funds,” according to Vanguard. “The fund’s emphasis on slower-growing, higher-yielding companies can also mean that its total return may not be as strong in a significant bull market.”
This fund holds 191 stocks with a median market value of $119.6 billion. Nearly a third of the fund’s weight is allocated to financial services and healthcare names. VEIPX does require a $3,000 minimum investment.
Oakmark Intenrnational (OAKIX)
Expense Ratio: 0.96%
The Oakmark Intenrnational Fund (MUTF:OAKIX) is a no-load mutual fund for investors seeking international equity exposure. The investor class of this fund, which is highlighted here, has a minimum investment of just $1,000.
“Oakmark International invests in a diversified portfolio of common stocks of non-U.S. companies. The fund generally focuses on mid- and large-cap companies, though small-cap companies are also eligible for investment,” according to Oakmark.
This mutual fund can be used as an alternative to passive EAFE (Europe, Asia and Far East) funds because OAKIX has similar geographic exposures, though the fund is significantly underweight Japan relative to the MSCI EAFE Index. The U.K. and Germany combine for 36% of the fund’s geographic exposure. This is a targeted fund, a trait not often seen among passive EAFE strategies, as OAKIX holds just 61 stocks.
Metropolitan West Total Return Bond Fund (MWTRX)
Expense Ratio: 0.67%
The Metropolitan West Total Return Bond Fund (MUTF:MWTRX) is an actively managed alternative to passive aggregate bond funds. MWTRX usually has a duration of two to eight years and an average maturity of two to 15 years.
The fund can invest in “corporate bonds, notes, collateralized bond obligations, collateralized debt obligations, mortgage-related and asset-backed securities, bank loans, money-market securities, swaps, futures, municipal sercurities, options, credit default swaps, private placements and restricted securities,” according to the issuer.
At the end of last year, the bulk of MWTRX’s holdings were Treasuries, U.S. government agency debt and mortgage-backed securities (MBS), ensuring the fund’s credit quality was high.
Vanguard Mid-Cap Index Fund — Admiral Shares (VIMAX)
Expense Ratio: 0.05%
For investors looking for a cost-efficient, no-load mutual fund focusing on mid-cap stocks, the Vanguard Mid-Cap Index Fund — Admiral Shares (MUTF:VIMAX) is one of the better options to consider. VIMAX is cheaper than 95% of competing funds, according to Vanguard data. It requires a minimum investment of $3,000.
This no-load mutual fund is a mid-cap blend fund, meaning its 368 holdings include both growth and value stocks. The median market value of VIMAX’s holdings is $14.7 billion, meaning this fund actually resides in the lower end of large-cap territory.
Financial services, industrial and technology stocks combine for over 55% of the fund’s weight. This no-load mutual fund carries a five-star Morningstar rating.
“Vanguard Mid-Cap Index is one of the best funds available for U.S. mid-cap stock exposure,” according to the research firm.
Fidelity New Markets Income Fund (FNMIX)
Expense Ratio: 0.84%.
For investors willing to take on more risk with their fixed-income investments, the Fidelity New Markets Income Fund (MUTF:FNMIX) is a compelling option. This Fidelity fund, which does not have a minimum investment, targets emerging markets bonds. Due to the risks associated with emerging-markets debt relative to U.S. government bonds, emerging markets bond funds usually carry higher yields. FNMIX fits that bill with a 30-day SEC yield of 5.6% and trailing-12-month yield of 4.8%.
The fund’s average maturity is just over 11 years. Credit quality is usually the primary consideration with emerging-markets bond funds and FNMIX is no different. This no-load mutual fund allocates about 64% of its weight to bonds rated BBB, BB or B, indicating a fair amount of the fund’s holdings carry non-investment-grade ratings.
Mexico, Turkey and Brazil are FNMIX’s largest geographic exposures. The fund, which has a four-star Morningstar rating, has a duration of 6.48 years.
As of this writing, Todd Shriber did not own any of the aforementioned securities.