You may need to start looking for a new financial advisor if your current one has put any of these high-fee, low-return "Mutual Fund Misfires of the Market" into your portfolio.
High fees plus poor performance: It's a pretty simple formula for a bad mutual fund. Some are worse than others - and some are so bad that they have earned a "Strong Sell" on the Zacks Rank, the lowest ranking of the nearly 19,000 mutual funds we rank daily.
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.
Franklin Mutual International A (FMIAX): 1.22% expense ratio and 0.88% management fee. FMIAX is a part of the Non US - Equity fund category, many of which will focus across all cap levels, and will typically allocate their investments between emerging and developed markets. With a five year after-expenses return of 0.88%, you're mostly paying more in fees than returns.
AQR Multi Strategy Alternative R6 (QSARX): 1.87% expense ratio, 1.75% management fee. QSARX is classified as an Allocation Balanced fund, which seeks to invest in a balance of asset types, like stocks, bonds, and cash, and including precious metals or commodities is not unusual. This fund has an annual returns of -2.57% over the last five years. Another fund guilty of having investors pay more in fees than returns.
American Funds ST Bond Fund of America 529A (CAAFX) - 0.73% expense ratio, 0.27% management fee. CAAFX is part of the Government Bond - Short fund category. Often seen as risk-free assets, these funds hold securities issued by the U.S. federal government and they focus on the short end of the curve. CAAFX has generated annual returns of 0.64% over the last five years. Ouch!
3 Top Ranked Mutual Funds
Now that you've seen the worst Zacks Ranked mutual funds, let's have a look at some of the highest ranked funds with the lowest fees.
Congress Mid Cap Growth Institutional (IMIDX): Expense ratio: 0.83%. Management fee: 0.6%. IMIDX is a Mid Cap Growth mutual fund. These mutual funds choose companies with a stock market valuation between $2 billion and $10 billion. This fund has achieved five-year annual returns of an astounding 10.93%.
American Funds Growth Fund of America R2E (RGEBX) has an expense ratio of 1.12% and management fee of 0.27%. RGEBX is a Large Cap Growth mutual fund, and these funds invest in many large U.S. firms that are projected to grow at a faster rate than their large-cap peers. With annual returns of 11.88% over the last five years, this is a well-diversified fund with a long track record of success.
Davenport Small Cap Focus Fund (DSCPX) has an expense ratio of 0.97% and management fee of 0.75%. DSCPX is a Small Cap Blend mutual fund that usually targets companies with a market capitalization of less than $2 billion. With annual returns of 10.67% over the last five years, this fund is a well-diversified fund with a long track record of success.
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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