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3 Mutual Fund Misfires to Avoid - February 25, 2020

Zacks Equity Research
·4-min read

If your advisor has you invested in any of these "Mutual Fund Misfires of the Market" with high fees and low returns, you need to rethink your advisor.

High fees coupled with poor results: It's a straightforward equation for an awful mutual fund. Some are more regrettable than others - and some are bad to the point that they have got a "Strong Sell" from our Zacks Rank, the lowest positioning of the almost 19,000 mutual funds we rank every day.

Below, you'll read about some of the funds included in our current list of "Mutual Fund Misfires of the Market." And if by chance you're invested in any of these misfires, we'll help and review some of our highest Zacks Ranked mutual funds.

3 Mutual Fund Misfires

Now, let's take a look at three market misfires.

Brandes International Small Cap Equity C (BINCX): 2.1% expense ratio and 0.95% management fee. BINCX is a Non US - Equity option, focusing their investments acoss emerging and developed markets, and can often extend across cap levels too. With a five year after-costs return of 1.2%, you're for the most part paying more in charges than returns.

First Investor International Opportunities Bond Institutional (FIOEX): 0.91% expense ratio, 0.75% management fee. FIOEX is an International Bond - Developed fund, and these funds funds focus on fixed income securities from developed nations apart from the United States. This usually results in countries like Japan, Germany, the UK, France, and Australia dominating the list of top holdings. This fund has an annual returns of -0.31% over the last five years. Another fund guilty of having investors pay more in fees than returns.

Touchstone Ultra Short Duration Fixed Income I (TSDIX) - 0.39% expense ratio, 0.25% management fee. This fund has yielded yearly returns of -0.21% in the course of the last five years. Too bad!

3 Top Ranked Mutual Funds

There you have it: some prime examples of truly bad mutual funds. In contrast, here are a few funds that have achieved high Zacks Ranks and have low fees.

Baron Global Advantage Fund Retail (BGAFX) is a winner, with an expense ratio of just 1.15% and a five-year annualized return track record of 15.18%.

Principal SmCap Gr I R6 (PCSMX) has an expense ratio of 0.99% and management fee of 1.08%. PCSMX is one of many Small Cap Growth mutual funds; these funds tend to create their portfolios around stocks with market capitalization of less than $2 billion. With annual returns of 12.04% over the last five years, this is a well-diversified fund with a long track record of success.

American Funds Growth Fund of America R2E (RGEBX) is an attractive fund with a five-year annualized return of 11.88% and an expense ratio of just 1.12%. RGEBX is a Large Cap Growth option; these mutual funds purchase stakes in numerous large U.S. companies that are expected to develop and grow at a faster rate than other large-cap stocks.

Bottom Line

We hope that your investment advisor (if you use one) has you invested in one or all of the top-ranked mutual funds we've reviewed. But if that is not the case, and your advisor has you invested in any of the funds on our "worst offender" list, it might be time to have a conversation or reconsider this vitally important relationship.

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Get Your Free (BGAFX): Fund Analysis Report
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Zacks Investment Research