Check out our top 10 best no-load mutual funds in 2019 and learn everything you need to know about mutual fund investing, which is one of the most attractive passive income opportunity for novice and experienced investors.
How Mutual Funds Work
A mutual fund is a popular investment vehicle where money from several people is pooled together and managed professionally by fund managers at a fee. Unlike other investment vehicles like stock trading, mutual funds trade once a day at maximum and most focus on long term results like 5 to 10 or even more years.
Mutual funds always aim for long term investing from a span of 5 or even more years. When you invest in a mutual fund, your money is pooled together with other investors and get managed professionally. Mutual funds charge you an annual fee for managing your account while some of them also charge a transaction fee for every position that is opened.
Through mutual funds, you get access to all instruments in the investment world as some offer thousands of them to you for trading. From stocks, metals, and commodities to even government bonds and treasury bills, mutual funds offer instant diversification compared to opening a portfolio for every instrument you want to invest in.
When selecting the best fund for you, always check for their turnover ratio; their frequency of trading as the lesser the trades opened, the better the rate of success and fewer transaction fees to be carried over to you as the investor.
Also, decide whether to go passive or active investing. Passive investing is through index funds while active funds are through fund managers. With active investing, scrutinize and understand their fees thoroughly to avoid hidden expenses getting sprouted unto you after investing with them.
Mutual Funds Vs Index Funds
Index funds are a type of mutual funds that have been gaining traction in recent years due to the spectacular results they present over the long term.
Index funds are a passively managed type of funds that tracks the performance of specific indexes such as the Dow Jones and S & P 500. Unlike conventional mutual funds, index funds aim to follow the market by taking a passive approach to make profits.
Also, they require less professional expertise and have lesser expenses and fees incurred since there’s less ‘human touch’.
Advantages of Mutual Funds
1: Instant Diversification.
Through funds, you get access to hundreds and even thousands of instruments to add to your portfolio as compared to only opening with say a stock exchange. By diversifying, you decrease the risk you experience if one stock or company incurs losses.
2: Ability to trade exotic assets.
You get instant access to trade in exotic minerals, commodities, and metals that aren’t in the public domain. Some of them are only traded through funds actually, so by investing in mutual funds, all these are accessible to you.
3: Professional Management.
Most people who wish to invest are not cut out to be experts in the field. So, instead of randomly opening trades out of gut or rumors, they prefer to let their accounts get managed by an experienced investment decision maker.
4: They are available even to small deposit owners.
While the most popular mutual funds offer services to high-end clients and have a market cap of over $200 million, some have online brokerages where one can invest with as little as $1000 and others are open to $100 capital. With this, everyone is able to create a portfolio and invest in many instruments without much capital.
Disadvantages of Mutual Funds
While mutual funds are attractive in their offers, they also carry some cons which set them back.
1: High fees and expenses.
Most funds charge exorbitant fees for annual account management. In some, despite the high fees, you’ll still get charged for every trade opened in your account. Over the long term, especially in a losing streak, these transaction fees become adding salt to an already wounded account.
2: Inconsistent returns.
Despite the high account management fees, most funds over the recent past have been presenting below average results. A fund house can experience a losing streak of even 3 years then in a span of 10 years manage to only break even. Due to these inconsistent results, investors aren’t guaranteed to receive profits even in the long term.
Types of Mutual Funds
1: Money Market Funds
These funds are focused on short term securities of fixed income such as treasury bills and government bonds. These fixed income securities provide a safer investment but with the lower potential of returns.
2: Equity Funds
These funds aim to grow faster than the money market funds. They invest in stocks hence provide a higher risk of returns with also a higher risk of losing money.
3: Fixed Income Funds
These aim to buy investments which pay a fixed rate of return such as the high yield corporate bonds.
4: Balanced Funds
Balanced funds invest in a combination of equities and fixed income securities.
5: Index Funds
As discussed above, they aim to track performances of the best performing indexes.
Do mutual funds pay dividends?
Depending on the mutual funds you buy, they may pay dividends, interest or both. Thing is, dividends from stocks are not a guarantee. Most companies though, pay dividends to their shareholders hence once they’re released mutual funds pass them on to their investors.
Are mutual funds safe?
Safety is a relative word understood differently by investors. While mutual funds are regarded as safe and risk-free, they also carry risks.
To ensure your investments are safe, always follow general investing precautions and follow the guidelines of the mutual funds you buy.
Best No Load Mutual Funds
No-load funds mean those that don’t charge transaction fees for every trade opened.
The best in 2019 include:
- Oakmark Investor
- Primecap Odyssey Stock
- Dodge and Sox stock (Dividends)
- Primecap Odyssey Growth
- T. Rowe Price Blue Chip
- Fidelity Total Bond Fund
Besides Fidelity, all these no-load funds have large market capitalization.
International Mutual Funds
- Buffalo International
- Brown Advisory Global Leade
- Vanguard Total World Stock
American Mutual Funds
- Schwab US Aggregate Bond ETF
- Vanguard Total Stock
- T. Rowe Price Tax-Efficient.
- Marshfield Concentrated