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Avoid These 3 Mutual Fund Misfires - February 24, 2020

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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 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.

Goodwood SMID Cap Long/Short Institutional : This fund has an expense ratio of 1.35% and a management fee of 0.84%. 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. GAMIX is a Small Cap Growth mutual fund building their portfolio around stocks with market caps under $2 billion and large growth opportunities. The fund has lagged performance-wise, so perhaps a simpler index future investing strategy might be more effective.

AQR Style Premia Alternative R6 (QSPRX - Free Report) . Expense ratio: 1.4%. Management fee: 0.84%. Over the last 5 years, this fund has generated annual returns of -0.41%.

Invesco Global Mkt Neutral Fd Cl A : This fund has an expense ratio of 1.49% and management fee of 0.95%. MKNAX is a Market Neutral - Equity mutual fund. These funds attempt to maximize returns, and usually hold 50% of their securities in a long position and 50% in a short position. With an annual average return of -5.02% 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

Now that we've covered our "worst offender" list, let's take a look at some of Zacks' highest ranked mutual funds with some of the lowest fees you may want to consider.

RMB Dividend Growth I : 0.8% expense ratio and 0.65% management fee. RMBDX is a part of the Large Cap Growth mutual fund category, which invest in many large U.S. companies that are expected to grow much faster compared to other large-cap stocks. With an annual return of 11.75% over the last five years, this fund is a winner.

AllianzGI BestStyles US Equit Instl is a stand out fund. ABTLX is classified as a Large Cap Blend fund. More often than not, Large Cap Blend mutual funds invest in companies with a market cap of over $10 billion. Buying stakes in bigger companies offer these funds more stability, and are well-suited for investors with a "buy and hold" mindset. With five-year annualized performance of 10.45% and expense ratio of 0.45%, this diversified fund is an attractive buy with a strong history of performance.

Victory Sycamore Established Value R6 (VEVRX - Free Report) : Expense ratio: 0.58%. Management fee: 0.45%. VEVRX is a Mid Cap Value mutual funds that aims to target medium-sized companies that possess strong value and income opportunities for investors. VEVRX has produced a 10.51% over the last five years.

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).

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