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.
Ivy Cundill Global Value Y (ICDYX): 1.36% expense ratio and 1% management fee. ICDYX 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. With a five year after-costs return of -0.66%, you're for the most part paying more in charges than returns.
Wells Fargo (NYSE:WFC) Short Duration Government C (MSDCX). Expense ratio: 1.55%. Management fee: 1%. Over the last 5 years, this fund has generated annual returns of 0.28%.
JPMorgan (NYSE:JPM) Research Market Neutral A (JMNAX) - 3.66% expense ratio, 0.8% management fee. JMNAX is a Market Neutral - Equity mutual fund. These portfolios usually hold 50% of their securities in a long position, as well as 50% in a short position. JMNAX has generated annual returns of -0.79% over the last five years. Ouch!
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.
Columbia Seligman Communications and Information R (SCIRX): Expense ratio: 1.49%. Management fee: 0.87%. SCIRX is part of the Sector - Tech mutual fund category that invests in technology and lets investors own a stake in a notoriously volatile sector, but with a much more diversified approach. This fund has achieved five-year annual returns of an astounding 16.92%.
Principal Mid Cap Growth III R4 (PPQSX) has an expense ratio of 1.29% and management fee of 0.98%. PPQSX is a Mid Cap Growth mutual fund. Mid Cap Growth funds pick stocks--usually companies with a market cap between $2 billion and $10 billion--that demonstrate extensive growth opportunities for investors compared to their peers. Thanks to yearly returns of 10.09% over the last five years, PPQSX is an effectively diversified fund with a long reputation of solidly positive performance.
T. Rowe Price Institutional Large Cap Growth (TRLGX) has an expense ratio of 0.56% and management fee of 0.55%. TRLGX 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 yearly returns of 14.74% 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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4 Warning Signs That Your Advisor Might be Sabotaging Your Financial Future
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Zacks Investment Research