5 Best-Performing No-Load Mutual Funds Of Q1
Zacks Investment Research | Apr 25, 2018 10:14PM ET
After strong growth in the first month of this year, the stock market entered into correction territory in February followed by a sharp decline in March due to a tech slump and trade war fears.
Given the negative outlook, no-load mutual funds are again in demand. 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 these funds do not carry the burden of management fees unlike funds with entry or exit loads. It comes as no surprise that no-load funds have managed to provide better returns compared to load funds in the last one year.
Dow, S&P 500 Down in The Red in Q1
Both the Dow and the S&P lost 2.3% and 1.2%, respectively. Both indexes traded in the red after nine straight quarters of gain. Moreover, Wall Street’s fear gauge, the Cboe Volatility Index (VIX), surged 81% over the first quarter, marking its biggest quarterly increase since 2011, according to the WSJ Market Data Group.
The indexes posted gains during the month of January, but tanked around 10% in February due to high inflationary expectations. Stocks continued to suffer in March due to concerns over a possible global trade war initiated by President Trump’s tariff plans. Additionally, the tech stock plunge that occurred due to certain company-related issues also weighed on markets.
Why Invest in No-Load Funds?
With the broader market sliding, investing in funds that won’t burn a hole in your pocket seems prudent. Thus, investing in no-load funds won’t be a bad proposition. After all, 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 Load: These are fees paid 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 Load: These are fees paid 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 purchase. The sales load here is calculated off the initial investment made and not based on ultimate fund value.
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Comparative Analysis of No-Load Funds
Among the top no-load fund category, Matthews China Investor Zacks Investment Research
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