No-load fund best buys
- Alan Lavine and Gail Liberman
Improve returns by sticking with no-load mutual funds that charge no upfront or back-end sales charges.
This way, 100 percent of your money is invested in the fund. But even though a fund is no-load, it pays to check expense ratios. If a fund's annual expense ratio, or fees expressed as a percentage of the fund's net asset value, is high, you risk losing the benefit of not paying a load.
How to check this out? The average runs about .50 percent for a money market mutual fund; 1 percent for a bond fund and 1.50 percent of a stock fund. More than that, and you could be paying too much.
You generally can buy no-load funds directly from the fund group via a toll-free number. Many no-load funds also are available though discount brokerage firm mutual fund supermarkets.
Which no-load mutual funds to pick?
Sheldon Jacobs, highly regarded editor-in-chief of The No-Load Investor, Brentwood, Tenn., suggests two. They are well-managed stock funds with solid track records compared with similar funds, he says. But be advised. Past performance is no indication of future results. Also, these funds are very risky and should only represent a small portion of your holdings.
Fidelity Value. The fund has gained 15.6 percent annually over the past five years ending in July. Rich Fenton has been managing the fund since 1996. Jacobs says Fenton has done well because he buys undervalued mid-size, out-of-favor companies. He seeks stocks and industries that have lagged the market. He won't buy a stock unless the price is cheap. He seeks stocks trading below their historical averages. The fund owns a lot of technology and health care stocks today.
T. Rowe Price Emerging Europe and Mediterranean Fund. This fund has a great three-year track record compared with its peers. This year, it's up 32 percent through July. Chris Anderson, manager, invests in Eastern and Central Europe, Southern Europe and the Middle East. He is heavily invested in Russia, Turkey and Egypt. The fund buys growth stocks with high profitability and lots of business opportunities. Jacobs warns, though, that this is a very risky investment.
However, by investing a very small proportion of your holdings in a riskier fund you know is well-managed, you might, over the long-term, give your overall holdings a boost.
Alan Lavine and Gail Liberman are husband and wife columnist and authors of The Complete Idiot's Guide To Making Money With Mutual Funds, (Alpha Books). Al and Gail's new book is Rags to Retirement, (Alpha Books).
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