Does your current advisor have your money invested in these "Mutual Fund Misfires of the Market" that charge high fees for low returns? If so, it may be time for a new 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.
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.
Pioneer Solutions Balanced A (PIALX): This fund has an expense ratio of 0.45% and a management fee of 0%. Without even doing any in-depth analysis, just the fact that you are paying more in fees than you're earning in returns is reason enough not to invest. PIALX is a part of the Allocation Balanced fund category; these funds like to invest in a variety of asset types, finding a balance between stocks, bonds, cash, and sometimes even precious metals and commodities; they are mostly categorized by their respective asset allocation. The fund has lagged performance-wise, so perhaps a simpler index future investing strategy might be more effective.
Templeton Emerging Markets Small Cap A (TEMMX): 1.87% expense ratio, 1.35% management fee. TEMMX is a part of the Non US - Equity fund category, many of which will focus across all cap levels, and will typically allocate their investments between emerging and developed markets. This fund has an annual returns of 1.47% over the last five years. Another fund guilty of having investors pay more in fees than returns.
Rydex S&P Small Cap 600 Pure Value H (RYAZX) - 1.62% expense ratio, 0.75% management fee. This fund has yielded yearly returns of 1.4% in the course of the last five years. Too bad!
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.
Putnam Global Technology A (PGTAX): Expense ratio: 1.16%. Management fee: 0.62%. PGTAX is a Sector - Tech mutual fund, allowing investors to own a stake in a notoriously volatile sector with a much more diversified approach. This fund has achieved five-year annual returns of an astounding 18.8%.
American Funds Growth Fund of America R5 (RGAFX) has an expense ratio of 0.37% and management fee of 0.27%. RGAFX 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 annual returns of 12.68% over the last five years, this is a well-diversified fund with a long track record of success.
T. Rowe Price Mid-Cap Growth R (RRMGX) has an expense ratio of 1.27% and management fee of 0.61%. RRMGX is a Mid Cap Growth mutual fund. These mutual funds choose companies with a stock market valuation between $2 billion and $10 billion. With annual returns of 12.17% over the last five years, this fund is a well-diversified fund with a long track record of success.
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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