Mutual Fund Misfires of the Market - January 27, 2020

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 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.

First, let's break down some of the funds currently part of our "Mutual Fund Misfires of the Market." If you happen to have put your money into any of these misfires, we'll help assess some of our best Zacks Ranked mutual funds.

3 Mutual Fund Misfires

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

AQR Multi Strategy Alternative N (ASANX): 2.23% expense ratio and 1.75% management fee. ASANX is an Allocation Balanced mutual fund. Allocation Balanced funds look to invest across asset types, like stocks, bonds, and cash, and including precious metals or commodities is not unusual; these funds are mostly categorized by their respective asset allocation. With a five year after-costs return of -2.9%, you're for the most part paying more in charges than returns.

Leader Total Return C (LCCTX): LCCTX is part of the Investment Grade Bond - Intermediate fund group. These mutual funds focus on the middle part of the curve, generally with bonds that usually mature in more than three years but less than 15 years. LCCTX offers an expense ratio of 2.96% and annual returns of 0.75% over the last five years. Even if this fund can be positioned as a hedge during the recent bull-market, paying more in fees than returns over the long-term should never be an acceptable result.

Transamerica Emerging Markets Equity C (CEMTX): This fund has an expense ratio of 2.2% and management fee of 0.92%. CEMTX 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 an annual average return of 1.98% over the last five years, the only thing absolute about this absolute return fund is that it absolutely deserves to be on our "worst offender" list.

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.

Dreyfus US Equity Fund A (DPUAX): Expense ratio: 1.15%. Management fee: 0.75%. DPUAX 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. This fund has achieved five-year annual returns of an astounding 10.14%.

BlackRock Advantage Large Cap Core S (MSLRX) has an expense ratio of 0.72% and management fee of 0.43%. MSLRX is part of the Large Cap Blend section, and these mutual funds most often invest in firms with a market capitalization of $10 billion or more. By investing in bigger companies, these funds offer more stability, and are often well-suited for investors with a "buy and hold" mindset. With annual returns of 10.19% over the last five years, this is a well-diversified fund with a long track record of success.

Virtus KAR International Small-Cap I (VIISX) has an expense ratio of 1.29% and management fee of 1%. VIISX 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 annual returns of 12.89% over the last five years, this fund is a well-diversified fund with a long track record of success.

Bottom Line

So, there you have it - if your advisor has you invested in any of our "Mutual Fund Misfires of the Market," there is a good probability that they are either asleep at the wheel, incompetent, or (most likely) lining their pockets with high fee commissions at your financial expense.

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