If your financial advisor made you buy any of these "Mutual Fund Misfires of the Market" with high expenses and low returns, you need to reassess your advisor.
How can you tell a good mutual fund from a bad one? It's pretty basic: If the fund has high fees and performs poorly, it's not good. Of course, there's a range - but when a mutual fund earns a Zacks Rank of #5 (Strong Sell) that means it's among the worst of roughly 19,000 funds we rate each day.
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.
Fidelity Advisor Event Driven Opportunities C (FATJX): 2.28% expense ratio and 0.8% management fee. FATJX is a Small Cap Blend mutual fund, and usually targets stocks with market caps of less than $2 billion, letting investors diversify their funds among other kinds of small-cap equities. With a five year after-expenses return of 1.72%, you're mostly paying more in fees than returns.
Iron Horse Fund A (IRHAX): IRHAX is a Long Short - Equity option. These funds' investment strategy consists of minimizing overall market exposure, while at the same time taking long positions in equities that are expected to appreciate and short positions in equities that are projected to decline. IRHAX offers an expense ratio of 1.14% and annual returns of 0.23% over the last five years. Even if this fund can be positioned as a hedge during the recent bull-market, paying more in fees than returns over the long-term should never be an acceptable result.
Invesco Low Volatility Emerging Markets Y (LVLYX) - 1.07% expense ratio, 0.94% management fee. LVLYX 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. LVLYX has generated annual returns of -1.96% over the last five years. Ouch!
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.
Janus Henderson Global Technology S (JATSX) is a winner, with an expense ratio of just 1.23% and a five-year annualized return track record of 18.39%.
Fidelity Trend Fund (FTRNX) is a stand out fund. FTRNX is a Global - Equity mutual fund investing in bigger markets like the U.S., Europe, and Japan; these kinds of funds aren't limited by geography. With five-year annualized performance of 12.15% and expense ratio of 0.65%, this diversified fund is an attractive buy with a strong history of performance.
Cohen & Steers Realty Shares (CSRSX) has an expense ratio of 0.97% and management fee of 0.79%. Sector - Real Estate funds like CSRSX are known to invest in real estate investment trusts (REITs). A popular income vehicle thanks to its taxation rules, a REIT is required to pay out at least 90% of its income annually to avoid double taxation. With annual returns of 11.4% 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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Zacks Investment Research