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Mutual Fund Misfires of the Market - February 17, 2020

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If your advisor has you invested in any of these "Mutual Fund Misfires of the Market" with high fees and low returns, you need to rethink your advisor.

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.

Thornburg Limited Term Municipal CA C (LTCCX): Expense ratio: 1.21%. Management fee: 0.49%. After expenses, the 5 year return is 0.97%, meaning your fees are far higher than the fund's returns.

AIG International Dividend Strategy C (SIETX): 2.55% expense ratio, 1%. SIETX 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 yearly returns of -0.53% over the most recent five years. Another fund liable of having investors pay more in charges than what they receive in return.

Federated Fund for US Government Security B (FUSBX - Free Report) : This fund has an expense ratio of 1.72% and management fee of 0.41%. FUSBX 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. With an annual average return of 0.71% 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

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.

PIMCO StocksPLUS Absolute Return Institutional (PSPTX): 0.64% expense ratio and 0.64% management fee. PSPTX 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 11.63% over the last five years, this fund is a winner.

MFS Research R2 (MSRRX) has an expense ratio of 1.05% and management fee of 0.43%. MSRRX 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 11.17% over the last five years, this is a well-diversified fund with a long track record of success.

American Funds Washington Mutual Investors R3 (RWMCX) has an expense ratio of 0.92% and management fee of 0.23%. RWMCX 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. With annual returns of 10.21% over the last five years, this fund is a well-diversified fund with a long track record of success.

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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