Finding great low-cost mutual funds using index funds for a high-performing portfolio is simple when you do a little research. Great mutual funds are a result of a stock market that has been going up consistently for the past several years and is poised to continue on the current positive course.
Therefore, now may be the time to research quality mutual funds. But, don’t get discouraged by the ups and downs of the financial markets; the overall balance of the markets for the past 60 years has ended up. Staying the course for years and decades is a positive benefit for long-term investors.
Low-Cost Mutual Funds
1. Definition of Low-Cost Mutual Funds Using Index Funds
There are literally thousands of quality mutual funds to research; the small list below will get you started. First, there are a few things you should know. Mutual funds are used for your 401k savings, regular savings, or many types of investment accounts. Index funds track a particular index, such as the index of Standard and Poors’ top 500 stocks, the index of top mid-cap stocks, or the NASDAQ 100 index.
You can purchase most low-cost mutual funds using index funds online. Buy from brokers such as Fidelity Investments, Charles Swab, and TD Ameritrade with no-load and extremely low cost.
Or you can go directly to individual mutual fund company websites such as Vanguard Mutual Funds, T. Rowe Price, American Century, Parnassus, Permanent Portfolio, and others. These are all low-cost mutual funds.
Those I mentioned here happen to be among the largest companies, but there are many others to choose from as research candidates. Most of the discount brokers offer free mutual fund research as well as Yahoo Finance, MSN Finance, and Google Finance, all under the mutual fund channel.
2. Finding High Performing Mutual Funds
To find high-performing mutual funds, you must look at cost of the fund; returns, tax Rate, and asset allocation are four of the major categories to look at when researching a mutual fund.
There are many more that can be found when mutual fund reports are read, listed on the financial websites, and in the prospectus of the fund.
It is imperative that you know what you are buying before you buy it. Re-Read the prospectus of the mutual fund you are interested in several times prior to purchase decisions.
All of the following mutual funds mentioned are no-load funds. The following facts are current as of August 2022, they were taken from listed mutual fund rating companies.
3. Cost Or Expense Ratio of Funds
Cost is most important for high-performing mutual funds because the performance of mutual funds goes up and down over time, as do most investments.
The lower the cost, the more money goes to your investment. If your mutual fund goes way down, a high cost may be challenging. A reasonable cost almost goes unnoticed if the fund performs well over time.
Keep as much of your investment as possible by focusing on low-cost mutual funds. If you are a beginner, it is good to focus on mutual funds that are listed as low cost and low risk.
Most of these funds do not require a load or upfront cost unless you cancel the fund before 30-90 days. Each fund varies; read the individual fund prospectus.
4. Returns of Mutual Funds
High-performing, low-cost mutual funds have high returns and are calculated after all costs are deducted. A great one-year return may be a fluke. I like to look at the longer returns of the mutual fund. After all, an investment is an increase in the value of an instrument over time.
I prefer to look at the 5 and 10-year returns of mutual funds to get a broader picture. If the 1 and 3-year returns are high also, that may be the sign of a winner too.
Bear in mind you must read the recent news and statistics of your mutual fund because past performance is no guarantee of future performance.
5. Allocation of Mutual Fund Assets
You don’t need a lot of mutual funds if you choose quality since a mutual fund usually consists of a diverse mix of stocks. There are different types of mutual funds. So if you choose to own some, they should be of different asset allocation groups to avoid overlapping investments.
Some of the different types of asset allocation groups are Large Growth, Small Growth, Large Value, Short-Term Bond, Mid-Cap Value, Diversified Emerging Markets, and many more.
When you go into an online investment area, read about each different type of mutual fund available. If you are a beginner, it may be a good idea to study the low-risk, low-cost mutual funds first.
6. Taxes Paid on Mutual Fund Profits
All of the funds listed below have low turnover and, therefore, low tax rates. The turnover rate is the rate at which stocks in the fund are bought and sold. If the stocks are kept long-term, they will be subject to long-term capital gains tax, which is amongst the lowest taxes to be paid.
Mutual Funds Are a Great Way For Beginners and Advanced Alike to Invest
7. These are current Mutual Funds with Top Standings in the Respective Categories
Index mutual funds invest in the full spectrum of stocks in a particular index. For example, S&P 500 index funds are mutual funds or ETFs that track the Standard and Poor’s index of the 500 largest U.S. companies. They are low-cost and have high assets under management.
This Article is Updated From 3/17/20
As of 8/17/2022 – Two of many Index Mutual Funds
Fidelity 500 Index Fund (S&P 500) FXAIX
Morningstar Rating 5 out of 5
Type: Large Blend
Minimum to Invest = 0, This means anyone can
open an account and invest in this fund.
Expenses: Very low-Yearly Fee=.015% per year
No Load upfront or backend
Return 3 years: 13.35%
Return 5 years: 12.82%
Return 10 years: 13.79%
What do these statistics mean? If you had put $10,000 invested in this fund in 2012, you would now have about $36,000 without adding to the fund. If you added to the fund every month $50, then you could have doubled or tripled that balance. When you add to a fund monthly, that is called dollar cost averaging.
As of 8/17/2022
Fidelity Mid Cap Index Fund – FSMDX
Morningstar Rating 5 out of 5
Type: Mid Cap Blend
Expenses: Very low-Yearly Fee=.025% per year
No Load upfront or backend
Return 3 years: 9.46%
Return 5 years: 9.69%
Return 10 years: 12.30%
If you put $10,000 into this fund in 2012 and leave it until 2022, you would have
about $27,000. But, if you also dollar-cost-average into the fund, also known as
adding an additional $50, you could double or triple this balance.
These are just a few examples of high-performing mutual funds, there are many. Many high-quality mutual funds will be found with a research session.
This is not a solicitation to buy a mutual fund. These are only mutual fund suggestions for you to research. Read the mutual fund prospectus before you consider purchasing a mutual fund. Most are available online at each mutual funds website.
These mutual funds were given a top rating by at least 7 different mutual fund research sites.
Full disclosure – I have positions in both of these funds.
The More You Know, The More You Grow – Your Finances
MsFinancialSavvy, Lois Center-Shabazz
Lois Center-Shabazz| Money Strategist | Course Delta Agency
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