With investing, as with most things in life, cost matters. Every dollar you pay in fees on your investments is a dollar that isn’t going toward generating returns on your money. Fewer expenses mean higher earning power and more money in your pocket to invest.
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One often overlooked fee on some mutual funds is sales loads, or commissions paid to the advisor or broker who sells you the fund. Sales loads can be applied when you buy a fund, called front-end sales loads, or when you sell your shares, called back-end sales loads, and can be as high as 8.5% of your investment.
To keep costs low when investing in mutual funds, look for “no-load mutual funds,” which won’t have sales charges. However, some funds may have a sales load at certain brokers but not others, so it’s important to look closely before investing.
Note that even no-load mutual funds may still have expense ratios, which represent the amount of invested capital that goes toward running the fund. But these, too, can be minimized with savvy shopping.
What follows are five of the best no-load mutual funds. Each has earned five stars from Morningstar analysts:
| Fund | Expense Ratio |
| Fidelity Select Semiconductors Portfolio (ticker: FSELX) | 0.65% |
| Fidelity 500 Index Fund (FXAIX) | 0.015% |
| Vanguard Wellesley Income Fund (VWINX) | 0.23% |
| Fidelity U.S. Sustainability Index (FITLX) | 0.11% |
| Vanguard International Core Stock Fund (VWICX) | 0.48% |
Fidelity Select Semiconductors Portfolio (FSELX)
The Fidelity Select Semiconductors fund invests primarily in companies that design, manufacture or sell semiconductors or similar electronic components. The fund is nearly 82% invested in semiconductor companies, with over 85% of investments based in the U.S.
“This fund is great for long-term investors that are trying to accumulate wealth and build up the biggest nest egg possible,” says Ron Tallou, investment advisor representative and founder and owner of Tallou Financial Services in Troy, Michigan.
FSELX has an average annual return of nearly 27% over the past 10 years and more than 31% in the past five years.
While past performance is not an indicator of future results, it’s “safe to say that semiconductors are here to stay given that much of the tech today is controlled by chips,” Tallou says. “It is an industry that is still growing, so the equities inside can still appreciate, but be ready to hold on to this one. With high annual returns it can also drop in a hurry in a down market.”
Fidelity 500 Index Fund (FXAIX)
If you want something a bit less niche, the Fidelity 500 Index Fund is a great pick. It’s an S&P 500 fund, so you’ll gain exposure to 500 of the largest publicly traded companies in the U.S. This entails fan favorites like Microsoft Corp. (MSFT), Apple Inc. (AAPL) and Amazon.com Inc. (AMZN).
FXAIX gets not only five stars but also a gold badge from Morningstar, indicating the analysts have the highest conviction it will outperform its peers or a relevant index over a market cycle.
What sets FXAIX apart from all the other S&P 500 funds is largely cost, with a rock-bottom expense ratio of 0.015%. For an even cheaper large-cap fund that invests in many of the same companies, you could also consider the Fidelity Zero Large Cap Index Fund (FNILX), which has no expense ratio and gets four stars from Morningstar.
[READ: 7 Best Vanguard Bond Funds to Buy]
Vanguard Wellesley Income Fund (VWINX)
Income investors may like the Vanguard Wellesley Income Fund, which also happens to be one of the longest-running mutual funds, as it debuted in 1970.
“Vanguard Wellesley Income’s experienced managers benefit from formidable analyst teams and oversee a time-tested approach grounded in bottom-up research,” writes Morningstar analyst Stephen Margaria, who calls VWINX simply “an exceptional approach to income at a low price.”
It uses a fixed-income heavy allocation to generate current and future income with nearly 62% of the portfolio in bonds and the remainder in stocks. This has resulted in a tidy 4.3% 30-day SEC yield as of April 30.
The fund managers “take a contrarian approach, guiding them to companies with strong fundamentals and above-average dividends that have experienced short-term headwinds, offering an appealing entry point thanks to their attractive valuations,” writes Nour Al Twal, Morningstar associate manager research analyst. “This posture has benefited the fund in times of market stress periods like 2022’s stock and bond market declines, where it fell by four percentage points less than the average peer over the year.”
It also boasts an expense ratio 0.23%, which is below the category average, though you’ll need to invest at least $3,000 as an initial purchase.
Like FXAIX, it gets both five stars and a gold badge from Morningstar.
Fidelity U.S. Sustainability Index (FITLX)
Socially and environmentally conscious investors rejoice: Here is a five-star fund for you.
The fund takes a best-in-class approach by tracking an index which holds only companies with high environmental, social and governance, or ESG, ratings relative to their competitors. Note this is different from an exclusionary approach to socially responsible investing where you avoid bad actors. It does this so that you still get exposure to all market sectors — but only the best companies within each sector in terms of ESG.
This also means you’ll see a lot of familiar names in the portfolio. Top holdings include Microsoft, Nvidia Corp. (NVDA) and both share classes of Google’s parent company, Alphabet Inc. (GOOG, GOOGL). But it also means some market leaders won’t make the cut, such as Apple and Amazon.
Being market-cap weighted, where larger companies account for a proportionately larger share of the portfolio, can also lead to overconcentration. For example, the fund’s largest holding, Microsoft, is 10.4% of the portfolio. The top 10 names combined represent nearly 36% of the portfolio.
But back to what FITLX does well: By taking only the best companies by ESG ratings in each sector, the fund “balances best-in-class ESG metrics while avoiding unintended sector tilts, which many ESG strategies have,” writes Morningstar analyst Lan Anh Tran.
It also works to avoid unnecessary turnover by only adding new constituents if the sector exposure drops below its target. This helps keep costs low, a savings passed onto investors through the well below-average expense ratio of 0.11%.
Vanguard International Core Stock (VWICX)
It would be remiss not to include an international fund on this list of the best no-load mutual funds. Thankfully, Vanguard offers an exceptional one.
VWICX is an actively managed fund, which means it does not simply follow an index’s lead. Instead, the fund’s managers work to create a portfolio of both growth and value stocks in developed and emerging markets outside of the U.S. They’re highly selective in this regard, having created a portfolio of only 81 stocks.
The majority of the portfolio is in Europe (46.2%), followed by the Pacific (26.1%) and emerging markets (22.2%), with 25 countries represented in all. As an international and emerging markets fund, this one can be more volatile than U.S. funds. But Morningstar considers it below-average risk relative to the foreign large blend category. This is paired with above-average returns and a low expense ratio. All of which has helped it earn five stars and a gold badge from the company’s analysts.
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5 Best No-Load Mutual Funds originally appeared on usnews.com
Update 05/17/24: This story was previously published at an earlier date and has been updated with new information.
