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.
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.
Eaton Vance Short Term Real Return C (ECRRX): This fund has an expense ratio of 1.7% and a management fee of 0.33%. 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. ECRRX is classified as a Government - Bonds fund. These funds hold securities issued by the U.S. federal government in their portfolios, and focus across the curve, meaning the yields and interest rate sensitivity will vary. The fund has lagged performance-wise, so perhaps a simpler index future investing strategy might be more effective.
Victory RS Global Natural Resources C (RGNCX): RGNCX is classified as a Sector - Energy mutual fund. Throughout the massive global energy sector, these funds hold a wide range of quickly changing and vitally important industries. RGNCX offers an expense ratio of 2.28% and annual returns of -17.77% 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.
Templeton Frontier Markets A : Expense ratio: 1.96%. Management fee: 1.4%. TFMAX is a Non US - Equity option, focusing their investments acoss emerging and developed markets, and can often extend across cap levels too. With annual returns of just -4.3%, it's no surprise this fund has received Zacks' "Strong Sell" ranking.
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.
American Funds Washington Mutual Investors F2 (WMFFX): Expense ratio: 0.38%. Management fee: 0.23%. WMFFX is a part of the Large Cap Value category, and invests in equities with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value. This fund has achieved five-year annual returns of an astounding 10.81%.
Fidelity Series Opportunistic Insights (FVWSX) has an expense ratio of 0.03% and management fee of 0%. FVWSX 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. Thanks to yearly returns of 13.07% over the last five years, FVWSX is an effectively diversified fund with a long reputation of solidly positive performance.
ClearBridge Small Cap Growth 1 (LMPMX) is an attractive fund with a five-year annualized return of 10.67% and an expense ratio of just 0.94%. LMPMX is a Small Cap Growth mutual fund building their portfolio around stocks with market caps under $2 billion and large growth opportunities.
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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