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.
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.
Federated Government Income Securities A (FGOAX): Expense ratio: 1%. Management fee: 0.6%. After expenses, the 5 year return is 0.93%, meaning your fees are far higher than the fund's returns.
American Funds ST Bond Fund of America R4 (RAMEX): 0.69% expense ratio, 0.27% management fee. RAMEX 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 0.65% over the last five years. Another fund guilty of having investors pay more in fees than returns.
Aquila Hawaiian Tax Free Trust C (HULCX) - 1.68% expense ratio, 0.23% management fee. HULCX is a Muni - Bonds mutual fund; these funds invest in debt securities issued by states and local municipalities, which are typically used to pay for infrastructure construction, schools, and other government functions. HULCX has generated annual returns of 0.96% 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.
American Funds Growth Fund of America R6 (RGAGX): Expense ratio: 0.32%. Management fee: 0.27%. RGAGX 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. This fund has achieved five-year annual returns of an astounding 12.74%.
Victory Sycamore Small Company Opportunity I (VSOIX) is a stand out fund. VSOIX is a Small Cap Value mutual fund option, which typically invest in companies with market caps under $2 billion. With five-year annualized performance of 11.03% and expense ratio of 0.92%, this diversified fund is an attractive buy with a strong history of performance.
JPMorgan (NYSE:JPM) Mid Cap Growth Fund R2 (JMGZX) is an attractive fund with a five-year annualized return of 11.47% and an expense ratio of just 1.48%. JMGZX is a Mid Cap Growth mutual fund. These funds aim to target companies with a market capitalization between $2 billion and $10 billion that are also expected to exhibit more extensive growth opportunities for investors than their peers.
Bottom Line
Along these lines, there you have it - if your financial guide has you put your money into any of our "Mutual Fund Misfires of the Market," there is a strong likelihood that they are either dormant at the worst possible time, inept, or (in all probability) filling their pockets with high fee commissions at the cost of your financial objectives.
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Zacks Investment Research