| No Load Mutual Funds. Are They Right For You? |
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| Written by Marry Kroger | ||
Mutual Funds Best Used StrategiesOne of the easiest and least expensive to start handling a diversified portfolio of investments is with a no-load mutual fund, a fund you can buy without paying a sales commission. Eventually, you might want to own five or six funds, each representing different assets and investing styles. But for now choose a fund with a broad selection of stocks, low annual expenses and an experienced manager who has seen a few stock market roller coaster rides. More good news for beginning investors:Brokerage firm Charles Schwab has lowered the minimum investment on all of its funds to $100 (initial investments previously ranged from $1,000 to $2,500). A good bet among the firm’s funds is Schwab Core Equity (symbol SWANX), which uses computers to select large-company stocks based on a number of factors. The fund, which charges a low 0.75% in annual expenses, has returned an annualized 12% over the past five years. A higher-risk choice, with a $250 minimum, is Hodges fund (HDPMX). Father-and-son team Don and Craig Hodges steer this fund toward firms of all sizes that have increasing profits. The Dallas-based duo make decisions on how to allocate money based on the fundamentals of stocks they’re examining—not on economic predictions. Hodges, which sometimes takes investors for a wild ride, has returned an annualized 10% over the past decade. On average, that’s about four percentage points per year better than Standard & Poor’s boo-stock index. Another adventurous fund is Excelsior Value & Restructuring (UMBIX). The fund, which gained an average of 12% per year over the past decade, invests in companies that are restructuring or that are in industries undergoing consolidation. A good choice if you’d prefer a less-risky investment is Homestead Value (HOVLX). It returned an annualized 8% over the past decade. Excelsior and Homestead each require $500 to start. If you prefer a socially screened fund, you might consider Pax World Balanced (PAXWX). The fund, which requires a $250 investment, doesn’t buy companies that derive significant revenue from alcohol, gambling or weapons. Manager Chris Brown currently has the fund tilted 70% toward stocks, with the rest in bonds and cash. Over the past 20 years, Pax has delivered an annualized 9%. Expenses are a reasonable 0.96% per year. After doing a bit of homework on the best mutual fund famalies out there, you will find that mutual funds are great way to be diversified in the market.              
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