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.
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.
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.
Eagle MLP Strategy A (EGLAX): 1.67% expense ratio and 1.25% management fee. EGLAX is a Sector - Energy fund, which are comprised of various changing and hugely important industries throughout the massive global energy sector. With a five year after-costs return of -9.87%, you're for the most part paying more in charges than returns.
Iron Horse Fund I (IRHIX). Expense ratio: 1.7%. Management fee: 1.25%. Over the last 5 years, this fund has generated annual returns of 1.6%.
Templeton Frontier Markets R6 (FFMRX): Expense ratio: 1.54%. Management fee: 1.4%. FFMRX is a Non US - Equity fund. Many of these funds like to allocate across emerging and developed markets, and will often focus on all cap levels. With annual returns of just -2.83%, 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.
MFS Mid-Cap Growth R6 (OTCKX) is a winner, with an expense ratio of just 0.74% and a five-year annualized return track record of 14.09%.
JPMorgan (NYSE:JPM) Small Cap Growth Fund R6 (JGSMX) has an expense ratio of 0.74% and management fee of 0.65%. JGSMX is one of many Small Cap Growth mutual funds; these funds tend to create their portfolios around stocks with market capitalization of less than $2 billion. Thanks to yearly returns of 14.77% over the last five years, JGSMX is an effectively diversified fund with a long reputation of solidly positive performance.
General Electric (NYSE:GE) RSP Mutual Fund (GESSX) is an attractive fund with a five-year annualized return of 10.75% and an expense ratio of just 0.14%. GESSX 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.
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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Zacks Investment Research