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.
Invesco Long/Short Equity Y (LSQYX): Expense ratio: 1.33%. Management fee: 0.8%. After expenses, the 5 year return is 0.66%, meaning your fees are far higher than the fund's returns.
RBC Emerging Markets Small Cap Equity A (RSMAX): RSMAX is a Non US - Equity option, focusing their investments acoss emerging and developed markets, and can often extend across cap levels too. RSMAX offers an expense ratio of 1.7% and annual returns of -1.14% 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.
ProFunds Pharm UltraSector Investor (PHPIX): Expense ratio: 1.86%. Management fee: 0.75%. PHPIX is part of the Sector - Health category, offering investors a focus on the healthcare industry, one of the largest sectors in the American economy. With annual returns of just 0.14%, it's no surprise this fund has received Zacks' "Strong Sell" ranking.
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.
Davenport Equity Opportunities Fund (DEOPX) is a winner, with an expense ratio of just 0.91% and a five-year annualized return track record of 10.54%.
MassMutual Premier Disciplined Growth Service Class (DEIGX) has an expense ratio of 0.74% and management fee of 0.45%. DEIGX 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. With annual returns of 11.43% over the last five years, this is a well-diversified fund with a long track record of success.
Principal Small Cap Growth I Institutional (PGRTX) has an expense ratio of 1.02% and management fee of 1.08%. PGRTX is one of many Small Cap Growth mutual funds; these funds tend to create their portfolios around stocks with market capitalization of less than $2 billion. With yearly returns of 11.37% over the last five years, this fund is well-diversified with a long reputation of salutary performance.
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