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.
The easiest way to judge a mutual fund's quality over time is by analyzing its performance and fees. Our Zacks Rank of over 19,000 mutual funds has identified some of the worst of the worst mutual funds you should avoid, the funds with the highest fees and poorest long-term performance.
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.
BTS Tactical Fixed Income A (BTFAX): Expense ratio: 1.49%. Management fee: 1%. After expenses, the 5 year return is 0.66%, meaning your fees are far higher than the fund's returns.
Franklin Low Duration Total Return C (FLDCX): 1.07% expense ratio, 0.5% management fee. FLDCX is a Government Bond - Short fund option. These funds hold securities issued by the U.S. federal government in their portfolios, and focus on the short end of the curve, which results in lower yields. This fund has an annual returns of 1.01% over the last five years. Another fund guilty of having investors pay more in fees than returns.
Invesco Gold & Precious Metals C (IGDCX): Expense ratio: 2.22%. Management fee: 0.75%. IGDCX is a Sector - Precious Metal mutual fund, typically investing in companies that are involved in the mining and production of precious metals like gold, silver, platinum, and palladium. With annual returns of just -0.47%, 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.
Nuveen Winslow Large-Cap Growth R6 (NWCFX): Expense ratio: 0.57%. Management fee: 0.69%. NWCFX 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. This fund has achieved five-year annual returns of an astounding 12.82%.
AQR Large Cap Defensive Style I (AUEIX) has an expense ratio of 0.4% and management fee of 0.25%. AUEIX 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. Thanks to yearly returns of 13.91% over the last five years, AUEIX is an effectively diversified fund with a long reputation of solidly positive performance.
ClearBridge Dividend Strategy IS (LCBEX): Expense ratio: 0.68%. Management fee: 0.65%. LCBEX is classified as an Allocation Balanced fund, which seeks to invest in a balance of asset types, like stocks, bonds, and cash, and including precious metals or commodities is not unusual. LCBEX has produced a 10.44% 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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