If your financial advisor made you buy any of these "Mutual Fund Misfires of the Market" with high expenses and low returns, you need to reassess your advisor.
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.
Ivy Cundill Global Value R (IYCUX): 1.69% expense ratio and 1% management fee. IYCUX is a Global - Equity mutual fund investing in bigger markets like the U.S., Europe, and Japan; these kinds of funds aren't limited by geography. With a five year after-expenses return of -0.98%, you're mostly paying more in fees than returns.
ClearBridge International Small Cap C (LCOCX). Expense ratio: 2.12%. Management fee: 1%. Over the last 5 years, this fund has generated annual returns of -0.38%.
Pacific Advisors Mid Cap Value C - 7.4% expense ratio, 1% management fee. PMVCX is a Mid Cap Blend mutual fund that typically features a portfolio filled with stocks of various sizes and styles; it allows for a diversification strategy focusing on companies with market caps between $2 billion and $10 billion. PMVCX has generated annual returns of -4.26% 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.
Hartford Core Equity R3 (HGIRX): 1.09% expense ratio and 0.35% management fee. HGIRX 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 an annual return of 11.6% over the last five years, this fund is a winner.
MFS Growth Fund I (MFEIX) has an expense ratio of 0.66% and management fee of 0.55%. MFEIX 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. With annual returns of 14.5% over the last five years, this is a well-diversified fund with a long track record of success.
T. Rowe Price Diversified Mid Cap Growth (PRDMX) is an attractive fund with a five-year annualized return of 11.43% and an expense ratio of just 0.8%. PRDMX is a Mid Cap Growth mutual fund. These mutual funds choose companies with a stock market valuation between $2 billion and $10 billion.
These examples underscore the huge range in quality of mutual funds - from the really bad to the astonishingly good. There is no reason for your advisor to keep your money in any fund that charges more than you get in return (unless they're getting something out of it, like a high commission).
Do You Know the Top 9 Retirement Investing Mistakes?
Whether you're planning to retire early or not, don't let investing mistakes derail your plans.
If you have $500,000 or more to invest and want to learn more, click the link to download our free report, 9 Retirement Mistakes that will Ruin Your Retirement.