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.
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.
Eaton (NYSE:ETN) Vance Government Obligation R (ERGOX): 1.45% expense ratio and 0.65% management fee. ERGOX is part of the Government Mortgage - Short fund section. Government Mortgage - Short funds focus on the mortgage-backed security (MBS) market and securities that usually have less than three years until maturity. With a five year after-costs return of 0.67%, you're for the most part paying more in charges than returns.
Gabelli Focus Five Fund I (GWSIX): 1.46% expense ratio, 1% management fee. GWSIX is a Small Cap Value fund, and these funds are known for investing in companies with market caps under $2 billion. This fund has an annual returns of -0.19% over the last five years. Another fund guilty of having investors pay more in fees than returns.
James Alpha Multi-StrtgyAltIncFd I (JAIMX): This fund has an expense ratio of 3.14% and management fee of 2%. JAIMX is a Long Short - Equity option. These funds' investment strategy consists of minimizing overall market exposure, while at the same time taking long positions in equities that are expected to appreciate and short positions in equities that are projected to decline. With an annual average return of 1.89% 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.
MassMutual Select Equity Opportunities R5 (MFVSX): Expense ratio: 0.84%. Management fee: 0.69%. MFVSX 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. This fund has achieved five-year annual returns of an astounding 10.73%.
Victory RS Global Growth R (RGGKX): Expense ratio: 1.1%. Management fee: 0.8%. RGGKX is a Global - Equity mutual fund. These funds invest in large markets like the U.S., Europe, and Japan, and operate with very few geographical limitations. RGGKX has managed to produce a robust 15.47% over the last five years.
MFS Mass Investors Growth Stock R4 (MIGKX) has an expense ratio of 0.48% and management fee of 0.33%. MIGKX 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 yearly returns of 14.27% 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).
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Zacks Investment Research