Back to top

Image: Bigstock

Mutual Fund Misfires of the Market - January 13, 2020

Read MoreHide Full Article

Does your current advisor have your money invested in these "Mutual Fund Misfires of the Market" that charge high fees for low returns? If so, it may be time for a new advisor.

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.

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.

First Investor International Opportunities Bond Adviser (FIODX): This fund has an expense ratio of 1.14% and a management fee of 0.75%. Without even doing any in-depth analysis, just the fact that you are paying more in fees than you're earning in returns is reason enough not to invest. FIODX is an International Bond - Developed mutual fund. Focusing on fixed income securities outside from developed nations besides the U.S., International Bond - Developed funds invest in assets from countries like Japan, Germany, the UK, France, and Australia. The fund has lagged performance-wise, so perhaps a simpler index future investing strategy might be more effective.

Marketfield C (MFCDX): MFCDX is a Long Short - Equity mutual fund, which look at taking long positions in equities that are expected to appreciate and short positions in equities that are projected to decline, but overall, hope to minimize their market exposure. MFCDX offers an expense ratio of 3.4% and annual returns of -2% 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.

Causeway Global Absolute Return Investor - 1.55% expense ratio, 1.1% management fee. This fund has yielded yearly returns of -2.61% in the course of the last five years. Too bad!

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.

Columbia Global Equity Fund Z (CGEZX): 1.08% expense ratio and 0.87% management fee. CGEZX is a Global - Equity mutual fund, which invests their assets in large markets, leveraging the global economy. With an annual return of 10.51% over the last five years, this fund is a winner.

Conestoga Smid Cap Investor (CCSMX) has an expense ratio of 1.1% and management fee of 0.85%. CCSMX is a Mid Cap Growth mutual fund. These mutual funds choose companies with a stock market valuation between $2 billion and $10 billion. With annual returns of 14.51% over the last five years, this is a well-diversified fund with a long track record of success.

ClearBridge Dividend Strategy 1 (LCBOX) has an expense ratio of 0.77% and management fee of 0.65%. LCBOX 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. With yearly returns of 10.33% over the last five years, this fund is well-diversified with a long reputation of salutary performance.

Bottom Line

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.

Published in