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7 Ways to Pick the Best Noload Mutual Funds and ETFs

Scientific Criteria for Selecting Top No Load Mutual Funds and the Best Mutual Funds and ETFs

People simply want to invest in what they hope will be the top no load and the best noload and exchange traded funds (ETFs). They want selection criteria that can lead to a higher probability of doing better in the future on both a sustained and risk-adjusted investment fund performance basis.

With real lives to lead, people who are not professional investors just want an efficient, but effective fund identification process. They want to pick the best mutual funds and ETFs that will make their investment assets work for them. They do not want to have to “work for” their assets by spending large amounts of time monitoring and repeatedly changing from one mutual fund or exchange-traded fund to another.

Millions of individual investors run futile hamster wheel races pursuing the illusion that the superior past performance of funds and individual securities will lead to superior future performance. The Pasadena Financial Planner has written these articles for those of you who want to stop “chasing your personal finance tail” and get on with your real life. Of course, it is difficult to stop running in a personal hamster wheel, unless you are convinced that there is better approach that you can implement yourself with relative ease. This article and this website should be good news to you, because it provides a better way for you to find the top no load and the best and ETFs.

Low Cost No Load Index Funds and ETFs Simply are Better

Taken as a whole, the vast body of investment research studies show that there really are better approaches to buying and owning and ETFs. You do not need to frantically chase fund performance. Performance chasing simply does not work.

The vast majority of individuals who chase fund performance get results that are far worse than a passive approach. Better performance tends to come to those individual investors who calm down and try to understand what has actually been demonstrated to work in the investment research literature.

Below we introduce seven articles on selection criteria can lead you to the and ETFs to hold for the very long term. In particular, note that you should use the first six selection criteria first. Only then should you look more closely at a fund’s past performance — and then only for the purpose of eliminating the worst historical performers. Read these seven articles for all the details!

In addition, if you want to use these 7 selection criteria to find the top no load and the best noload and ETFs on your own, you need some automated tools. Free ETF and mutual fund screening tools and free mutual fund databases would be a good thing. To find the best and ETFs, of course, you also need access to automated fund screening applications that have accurate and up-to-date data sets. The Pasadena Financial Planner has also written about screening applications that you can use free on the web. Click the Sitemap to find these articles.

The Best Mutual Fund Selection Problem — Solved for Individual Investors

This “Best No Load Mutual Funds” website provides two very key parts of the mutual fund and ETF selection puzzle for individual investors! The 7 scientifically based selection criteria introduced below provide rational fund screening rules.

These 7 screening criteria and the information provided on this website about free online investment fund screening tools can help you to winnow down the tens of thousands of available investment funds. As a result, you can reduce the selection problem down to a much more manageable number of funds for you to evaluate more carefully prior to investing. You do not have to pay high fees to an expensive financial advisor who will tell you to pick expensive funds with better performance that most often will turn out to be mediocre or worse in the long term.

Read the summaries below, and then click on the links for more information about these 7 scientific no load mutual fund and ETF selection criteria.

1) The Best Mutual Funds Have NO Sales Loads and NO 12b-1 Fees

The great majority of investors buy funds through advisors and pay a very, very high price over their lives for doing so. You simply do not need to pay hefty sales commissions (loads and higher annual expense ratios) to financial advisers who will only offer to you those funds that will pay them these hefty sales commissions.

When you pay someone’s sales commission who only tells you about expensive , you shoot yourself in both feet. First, you pay for inferior inferior advice. Second, you end up living with fund expenses that kill a substantial portion of the growth of your personal investment portfolio.

All mutual fund sales commissions and marketing fees can be avoided entirely by buying from the many mutual fund families that will sell fund shares directly to the public without such fees. ETFs will inevitably involve brokerage commissions, so always use discount brokers. Then, do not trade ETFs. Instead, sit tight with a very long-term buy-and-hold strategy to amortize these exchange-traded fund trading costs.

This investment fund selection criterion is very simple. Zero is the maximum amount of front-end load and back-end load fees that you should to pay. Zero is the maximum marketing or 12b-1 fee you should pay. Just say no.

2) The Best No Load Mutual Funds Have VERY LOW Management Expenses

Lower investment management fees are better. Lowest is best, and the lowest means passively managed and ETFs. Since there are numerous funds with annual expense ratios below .25%, look there first.

The higher the annual fund expense ratio the more you should question why you should pay such higher expenses. Paying more tends to lead to inferior rather than superior performance net of you overall investment costs and capital gains taxes.

3) The Best Noload Mutual Funds Have VERY LOW Portfolio Turnover

Lower portfolio turnover is better. Higher turnover increases hidden fund transactions costs, which tend not to be recouped through better performance. Look for single-digit and very low double-digit annual portfolio turnover rates in the no load index funds and ETFs that you purchase.

4) Avoid Large Actively Managed Mutual Funds

When they trade their overly large portfolio positions, large actively managed funds tend to affect securities market prices negatively. This can only drag down their net fund performance. The more they trade, the worse it tends to get. High trading costs suck value out of the mutual fund portfolio, and these costs are on top of the management fees that you pay directly.

High turnover by large funds should be a big red flag to you. If you avoid actively managed funds altogether, then your concerns about excessive fund size can be greatly reduced. Very large index funds need to manage their trading impact, but their turnover is far lower than actively managed funds.

5) Choose Mature Mutual Funds

The ETF and mutual fund industry throws a whole lot of new fund spaghetti on the wall to see what will stick. IF a new fund has a lucky streak, individual investor assets and “advised” assets come running their way. This is new fund success — at least success for the fund company.

However, when you invest in a very new fund, and it fails to grow, the fund is very likely to die or to be eaten. Rarely do lousy young and ETFs fold and refund money. Why confess incompetence and give back assets that could still yield fees?

When new funds do no attract enough assets, these “failed” funds (and your invested and diminished assets) most often will get merged into other funds. Unfortunately, new failed funds tend to get merged into larger funds with noticeably inferior historical performance.

Fund companies do not want to take any of the luster off the of their currently hot funds. Therefore, your money gets tossed into a bigger dog or just average fund. To avoid participating in this frenetic new fund infanticide process, only pick funds that have been in business for at least a few years.

Three years is probably enough. Mutual funds are like dogs in some respects. They grow up in just a few years. However, if they get caught in traffic at the wrong time on “The Street,” they may get run over or be eaten by a bigger dog.

6) Avoid Very Small Mutual Funds

Small funds cannot operate efficiently. They need a minimum critical mass of assets to fund required management expenses. Simply avoid very small funds. One or two hundred million dollars is probably the minimum. A higher minimum would also be fine, since there are still many larger funds to choose from that would meet these other criteria.

7) Screen Out Inferior Mutual Fund Performance

Evaluate the historical investment performance of and ETFs, but only AFTER using other screening criteria. Superior or average past fund performance tells you ABSOLUTELY NOTHING about how a fund will perform in the future. Pay attention to the fine print in the prospectus that says that past performance does not indicate future performance, because this has been shown to be true.

Ignore all the fund industry’s selective marketing of only their past winners. Individuals need to move beyond their naive and flawed notions about historical investment performance.

Modern, highly competitive, and real-time securities markets are auction price setting mechanisms that force the mass of smart and not-so-smart professional and amateur investors to accept largely average returns over time. Only very poor past performance tends to indicate potentially sub-par performance in the future, and that is probably due to higher costs. Therefore, eliminate only the worst of historical performance during fund screening and choose from the remainder — despite whether a fund has had superior, average, or even somewhat below average performance in the past.

Net of costs, four and five star funds are no better than three star funds and probably no better than even two star funds. Eliminate the bottom one-tenth to one-third of funds on a historical performance basis and choose from the remaining nine-tenths to two-thirds without stressing their past performance. Instead, choose no load index funds with very low costs and turnover.

Passive, low cost, noload usually have higher risk adjusted performance

If you evaluate the investment research literature, you will find that buying passive, low cost, noload and ETFs are far more likely to lead to higher risk adjusted investment performance over the long run. You can help to break the cycle of frequent fund buying and selling. You can get off the performance chasing hampster wheel that the securities industry wants you to keep running on for your entire life.

Securities sales people and financial advisors get paid more, when you pay more. That is why they shamelessly tell you that you must “pay more to get better performance.” This is complete rubbish. The investment research literature says the opposite. Pay less and get more.

Push the button — get some cheese. Tell naive investors to pay more — get some expensive cheese and some big bonuses. That is why rats and financial sales people keep hitting their buttons. When rats push the button, they get cheese. When financial salesmen push the button, they get paid very well.

Unfortunately, you end up being the one who pays them. If they really understand the investment research literature — and most securities sales people do not — then they just hope that you will never figure it out. Or, you might not realize the problem until years later, when your personal investment portfolio is much smaller than it could have been.

However, if you have already figured out the problem, then these 7 selection criteria offer you a better solution and a relatively easy way to pick the top no load and the best and ETFs. Become a proactive and extremely cost-conscious consumer of financial and investment products today!

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The Best No Load Mutual Funds and ETFs

How to Select the Top No Load Mutual Funds and ETFs

Given the extremely large number and variety of stock – equity, bond – fixed income, and equity and ETFs, investors need a rational basis to select among them. For example, there are over 60,000 different mutual fund investment share classes sold worldwide. Some and ETFs must be better than others, but which ones are they? How can you tell before the fact?

Without scientific selection criteria and a good understanding of which factors are more or less likely to increase your long-term risk-adjusted investment returns, you will make erroneous decisions based on false assumptions. The most obvious mistake that individuals make is to extrapolate past performance into the future. Superior past performance has simply not been shown to be a reliable predictor of superior future performance.

Low Costs Lead You to the Best No Load Fund

Financial industry sales people and investment advisors promote high cost with superior past performance, because they are easier to sell to naive investors. Furthermore, most investment advisors and financial sales people themselves do not know any better. The financial services companies that they work for do not teach them about the findings of the investment research literature.

Instead, they teach their “financial advisors” how to sell investment products quickly — whether or not these investments really are the best and ETFs from the point-of-view of their clients. The cycle of performance chasing goes on endlessly. In the process, it damages the long-term financial success of millions upon millions of individual investors around the world.

Mutual fund sales loads and 12b-1 marketing fees reduce your long-term investment performance. These investment sales commissions dramatically reduce the size of your long-term investment portfolio. The true costs of mutual fund sales loads and mutual fund 12b1 fees are far larger that most investors understand. Furthermore, financial advisors and commissioned securities sales people almost always promote and ETFs that are more expensive. You pay more to buy these funds and you pay more in the long run, because with sales loads and 12b1 fees are more likely to come up short in comparison with low cost no load index funds.

Buy Low Cost No Load Mutual Funds and Hold Them for Years

Investors want to select the best bond and equity and ETFs to hold for a long duration. Most would also like to invest additional amounts automatically into these funds over time without worrying about whether they do or do not own the best available. Most individual investors do not want to spend their precious personal time constantly figuring out which other to switch to. (Note that a minority of investors very actively and repeatedly switch between . Dalbar’s studies have show that the long-term performance of frequent switchers is simply terrible, when compared to long-term buy-and-hold investors.)

Also, buy-and-hold mutual fund and ETF investors usually are much less concerned about short-term fluctuations than they are about achieving their longer-term investment capital appreciation goals. Such investors want to use mutual screening or selection criteria to identify the best and to minimize the need for frequent changes due to inferior . Individual investors are better served, if they understand what the scientific investment literature says about potential selection criteria. Therefore, a series of articles the Pasadena Financial Planner discusses fund selection criteria that have a firm basis in scientific investing. Click on the Sitemap link to find them.

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