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Avoid These 3 Mutual Fund Misfires - November 19, 2019

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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.

How can you tell a good mutual fund from a bad one? It's pretty basic: If the fund has high fees and performs poorly, it's not good. Of course, there's a range - but when a mutual fund earns a Zacks Rank of #5 (Strong Sell) that means it's among the worst of roughly 19,000 funds we rate each 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.

Longleaf Partners Fund (LLPFX): 1.01% expense ratio and 0.78% management fee. LLPFX is an All Cap Value mutual fund, which invests in small, medium, and large-cap companies, though they end up focusing on bigger firms due to percentage of assets. With a five year after-expenses return of -0.15%, you're mostly paying more in fees than returns.

Brandes International Small Cap Equity A (BISAX): 1.36% expense ratio, 0.95% management fee. BISAX is a Non US - Equity option, focusing their investments acoss emerging and developed markets, and can often extend across cap levels too. This fund has an annual returns of -1.94% over the last five years. Another fund guilty of having investors pay more in fees than returns.

Federated Fund for US Government Security C (FUSCX - Free Report) - 1.71% expense ratio, 0.41% management fee. FUSCX is a Government Mortgage - Intermediate mutual fund; these funds focus on the mortgage-backed securities (MBS) market and specifially, securities that have at least three years, but less than 10, to maturity. FUSCX has generated annual returns of 1.35% over the last five years. Ouch!

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.

T. Rowe Price Small Cap Stock Fund (OTCFX): Expense ratio: 0.88%. Management fee: 0.74%. OTCFX is a Small Cap Blend mutual fund, and usually targets stocks with market caps of less than $2 billion, letting investors diversify their funds among other kinds of small-cap equities. This fund has achieved five-year annual returns of an astounding 11.69%.

Columbia Seligman Communications and Information A (SLMCX) has an expense ratio of 1.24% and management fee of 0.87%. SLMCX is part of the Sector - Tech mutual fund category that invests in technology and lets investors own a stake in a notoriously volatile sector, but with a much more diversified approach. With annual returns of 15.9% over the last five years, this is a well-diversified fund with a long track record of success.

Vanguard Explorer Fund Investor (VEXPX) is an attractive fund with a five-year annualized return of 10.46% and an expense ratio of just 0.46%. VEXPX 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.

Bottom Line

Along these lines, there you have it - if your financial guide has you put your money into any of our "Mutual Fund Misfires of the Market," there is a strong likelihood that they are either dormant at the worst possible time, inept, or (in all probability) filling their pockets with high fee commissions at the cost of your financial objectives.

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Federated Hermes US Govt Sec C (FUSCX) - free report >>

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