3 Top Under-$100 Mutual Funds You Must Buy – June 26, 2020

If you’re just starting out in the world of investing, cheap and low-risk funds should be your focus. To that end, buying mutual funds under $100 is a great way to get started. Obviously, there are plenty of low-priced stocks but it should be noted that stocks may not always provide investors the diversity that mutual funds assure.

Not to mention, risks associated with penny stocks are high. Meanwhile, there are low-cost mutual funds with decent returns where investors can park as little as $100.

At the same time, we know that a number of fund houses offer mutual funds with minimum initial investment amount of $3,000 or higher. For this reason, aspirants generally wait to save up for the minimum amount. However, there is always the opportunity cost of losing out on returns if you choose to wait. To counter this cost-hurdle, one must begin by buying low-cost funds.

However, finding mutual funds under $100 can be quite a task. This is because individual investors, who are just starting out, might find it difficult to screen best no-load mutual funds for $100 or less.

Notably, a $100 bet makes more sense when most of it is invested and no charge is paid from it. Funds that carry no sales load and have a relative low expense ratio should be preferred.

Although Vanguard Investments and Fidelity Investments offer some of the best no-load funds, their minimum initial investments are as high as $3,000 and $2,000, respectively. Beginners are not always fortunate to have a couple of thousand dollars at their disposal.

However, prominent firms such as BlackRock, Inc. and The Charles Schwab Corporation offer several high-quality, no-load funds with minimum initial investments of $100 or less. Mutual funds are thus an affordable option for diversity as well as safety.

Why Mutual Funds?

Mutual funds are great options for investors looking for a relatively less risky way to earn at least more than what fixed-income instruments offer. Money from individuals and even organizations are invested in stocks, bonds, or other assets covering diverse industries globally.

One of the benefits of mutual funds is that these allow a small investor to park money in a basket of securities at one go. Investors need not worry about investing a large chunk in securities separately. Moreover, these are less risky than any individual asset class as underperformance of a security gets mitigated by outperformance of others in the portfolio. In addition to asset diversification, mutual funds provide liquidity and economies of scale, and are professionally managed.

3 Best Funds to Buy Now

Given such circumstances, we have highlighted three funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that investors should consider. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $100.

We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.

Fidelity Select Biotechnology Portfolio (FBIOX Free Report) fund invests the majority of its assets in the securities of companies that are mostly engaged in the research, development, manufacture and distribution of biotechnological products and services. The fund also invests in companies that gain considerably from scientific and technological advances in biotechnology. The non-diversified fund invests in U.S. and non-U.S. issuers alike. 

This Sector — Health product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 15.9% over the three-year and 3.8% over the five-year benchmarks.

FBIOXcarries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.72%, which is below the category average of 1.24%. Also, the fund carries no sales load.

DFA International Sustainability Core 1 Portfolio (DFSPX Free Report) fund invests a major portion of its net assets in equity securities. It may gain exposure to companies associated with approved markets by purchasing equity securities in the form of depositary receipts, which may be listed or traded outside the issuer’s domicile country.

This Sector – Non Us-Equity product has a history of positive total returns for over 10 years. Specifically, the fund’s returns over the three and five-year benchmarks are 0.2% and 1.7%, respectively.

DFSPX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.33%, which is below the category average of 0.98%. Also, the fund carries no sales load.

AB Large Cap Growth Fund Class K (ALCKX Free Report) seeks long-term capital appreciation, and invests in equity securities of a limited number of large, carefully selected, high-quality U.S. companies. The fund normally invests the lion’s share of its assets in common stocks of large-cap companies. However, at times, the fund may invest in shares of exchange-traded funds instead of making direct investments in securities.

This Sector – Large Cap Growth product has a history of positive total returns for over 10 years. Specifically, the fund’s returns over the three and five-year benchmarks are 18.3% and 15.6%, respectively.

ALCKXcarries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.97%, which is below the category average of 1.05%. Also, the fund carries no sales load.

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