Many actively-managed mutual funds carry higher fees than passive index funds and exchange traded funds (ETFs). That isn’t necessarily a bad thing, assuming investors are able to identify the active managers with track records of consistent out-performance.
Making matters tougher on investors is the fact that some mutual funds come with “loads.” Loads are a real nuisance for investors. Put simply, a load is an added sales commission that goes to a middleman between the investor and the broker. Talk about pesky.
Fortunately, there are plenty of solid funds out there that are no-load mutual funds. That’s particularly good news for retirement investors or for those looking for mutual funds appropriate for retirement accounts. The more you can save on fees, the bigger your nest egg will be come retirement time.
Here are some no-load mutual funds to consider for retirement portfolios.
Mairs & Power Growth (MPGFX)
Expense ratio: 0.64% per year, or $64 on a $10,000 investment.
The Mairs & Power Growth Fund (MUTF:MPGFX) carries a minimum investment of $2,500, but at least this a no-load mutual fund and one that sports a three-star rating on Morningstar. Over the past 10 years, MPGFX has turned $10,000 into $37,000, beating the category average by about $3,000.
“The fund’s conservative performance pattern has been on display recently,” states Morningstar. “The portfolio is typically light on technology stocks because the process favors companies growing just a little faster than the overall economy. That hurt the fund in calendar-year 2017, when its 16.5% return lagged the S&P 500 by more than 5 percentage points and trailed nearly nine tenths of its peers. Yet the fund held up better than most in 2018’s volatile market, faring better than three fourths of its peer group.”
This no-load mutual fund allocates about half its weight to the industrial and healthcare sectors, well above the category averages. MPGFX is underweight energy, financial services, and technology stocks relative to competing funds.
Vanguard High-Yield Corporate Fund Investor Shares (VWEHX)
Expense ratio: 0.23%
Vanguard is known as one of the leaders of low-cost, passive revolution, but the fund giant also features a robust lineup of more traditional funds, not just ETFs. In fact, if you want a Vanguard junk bond, you’ll need to go the mutual fund route with the Vanguard High-Yield Corporate Fund Investor Shares (MUTF:VWEHX) because the issuer doesn’t yet offer an ETF for junk bonds.
Fortunately, VWEHX is a no-load mutual fund with a track record spanning more than four decades. While this no-load fund features a $3,000 minimum investment, its cost savings are compelling.
“The average Vanguard mutual fund expense ratio is 83% less than the industry average,” according to Vanguard. “85% of Vanguard no-load mutual funds performed better than their peer-group averages over the past 10 years.”
Fidelity Low-Priced Stock Fund (FLPSX)
Expense ratio: 0.62%
Over the course of every investor’s life, he or she has been tempted at least one time by a stock with a low price tag. Sometimes, those bets pay off. Other times they don’t, but low-priced stocks are an asset class where active management can be advantageous.
Enter the Fidelity Low-Priced Stock Fund (MUTF:FLPSX), which defines “low-priced stocks” as those with share prices of $35 or less. FLPSX is classified as a mid-cap value fund and has performed slightly better than that category average over the decade. The Fidelity fund’s fee is below the category average.
FLPSX invests “in companies with market values between $2 billion and $10 billion that fund managers believe are undervalued by the market. Value can be determined by a variety of measures, including price-to-earnings ratio, price-to-book ratio, or dividend yield,” according to Fidelity.
T. Rowe Price Blue Chip Growth (TRBCX)
Expense ratio: 0.70%
One of the highest-rated funds in the large-cap growth universe, the T. Rowe Price Blue Chip Growth (MUTF:TRBCX) is also a no-load mutual fund and one with five-star and gold ratings from Morningstar.
As is the case with many growth funds, this no-load mutual fund allocates a significant portion of its weight to the technology, consumer discretionary, and healthcare sectors (over two-thirds of its combined weight). TRBCX’s holdings have higher return on invested capital (ROIC) and cash flow than the components in category average funds.
“The fund has posted superb returns in the bull market dating back to 2009, with top-quintile or better showings in 2009, 2012, 2013, 2015, 2017, and 2018,” said Morningstar. “It has lost less than peers and the benchmark in down markets throughout (manager Larry) Puglia’s entire tenure.”
Vanguard Global Wellesley Income Fund Investor Shares (VGWIX)
Expense ratio: 0.43%
The Vanguard Global Wellesley Income Fund Investor Shares (MUTF:VGWIX) is a no-load mutual fund ideal for the current market environment. With interest rates falling in the U.S. and plenty of other markets and the world being awash in over $14 trillion in negative-yielding debt, investors are looking for income.
This no-load mutual fund sources income via dividend stocks and investment-grade bonds and currently allocates more than 60% of its weight to bonds. In other words, this is a conservative allocation or “balanced fund.” VGWIX is a global fund, which can help investors with the income objective because many developed markets outside the U.S. feature higher-yielding stocks than are found in the S&P 500.
Currently, VGWIX holds just 69 stocks, but the no-load fund’s equity roster trades at discount to the major U.S. benchmarks. The average duration on the 344 bonds held by VGWIX is 6.3 years, putting the fund’s fixed income roster in intermediate-term territory.
Vanguard Dividend Growth Fund (VDIGX)
Expense ratio: 0.22%
The Vanguard Dividend Growth Fund (MUTF:VDIGX) is a pleasant surprise addition to this list because for the past three years, this no-load mutual fund was not open to new investors, but that recently changed.
“The dividend growth fund, advised by Wellington Management, was introduced in 1992. Don Kilbride has run it since early 2006. The fund places in the top 15% of its Morningstar peer group based on 1-year, 3-year, 5-year, 10-year and 15-year returns,” according to Barron’s.
Classified as a large-cap growth fund, VDIGX is heavily defensive as over a third of its weight is allocated to consumer staples and healthcare stocks. Industrials are the largest sector weight at almost 21%. VDIGX components have better ROIC and cash flow than funds in the category average.
DF Dent Mid-Cap Growth (DFDMX)
Expense ratio: 0.98%
Among mid-cap growth funds, the DF Dent Mid-Cap Growth (MUTF:DFDMX) is somewhat pricey, but it’s a no-load fund and one of the sturdier options in its respective group. Open to new investors, DFDMX has $2,500 minimum investment, but it is worth the cost of admission because the fund is one of the most highly-rated products in its peer group.
Over the past decade, a $10,000 investment in DFDMX has turned into about $35,500, or about $12,000 more than the average fund in the mid-cap growth space. DFDMX’s managers can and do hold stocks for several years, sometimes allowing holdings to become large caps and retaining those positions as long as the companies maintain robust growth.
Industrial and technology stocks combine for 56% of this no-load fund’s weight. Free cash flow of its components top those of the Russell Mid-Cap Growth Index. Investors should note DFDMX is typically a concentrated fund. At the end of the first quarter, it had just 34 holdings.
Todd Shriber does not own any of the aforementioned securities.