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.
Alger International Growth A (ALGAX): 1.38% expense ratio and 0.71% management fee. ALGAX 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. With a five year after-costs return of 0.52%, you're for the most part paying more in charges than returns.
Ivy Natural Resources A (IGNAX): 1.59% expense ratio, 0.85%. IGNAX is a Sector - Energy fund, which are comprised of various changing and hugely important industries throughout the massive global energy sector. This fund has yearly returns of -9.62% over the most recent five years. Another fund liable of having investors pay more in charges than what they receive in return.
BlackRock (NYSE:BLK) Tactical Opportunities C (BRBCX): This fund has an expense ratio of 1.84% and management fee of 0.55%. BRBCX 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. With an annual average return of 1.47% 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.
Fidelity Select IT Services (FBSOX) is a winner, with an expense ratio of just 0.74% and a five-year annualized return track record of 19.73%.
T. Rowe Price Blue Chip Growth Fund (TRBCX): Expense ratio: 0.69%. Management fee: 0.56%. TRBCX 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. TRBCX has managed to produce a robust 12.88% over the last five years.
Commerce Mid Cap Growth (CFAGX) has an expense ratio of 0.81% and management fee of 0.5%. CFAGX 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 12.75% over the last five years, this fund is a well-diversified fund with a long track record of success.
Bottom Line
We hope that your investment advisor (if you use one) has you invested in one or all of the top-ranked mutual funds we've reviewed. But if that is not the case, and your advisor has you invested in any of the funds on our "worst offender" list, it might be time to have a conversation or reconsider this vitally important relationship.
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Zacks Investment Research