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.
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.
Touchstone Ultra Short Duration Fixed Income A (TSDAX): 0.69% expense ratio and 0.25% management fee. TSDAX 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. With a five year after-expenses return of -0.59%, you're mostly paying more in fees than returns.
PIMCO Allocation Asset Allocation Authority C (PAUCX): 2.71% expense ratio, 0.45% management fee. PAUCX 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. This fund has an annual returns of 1.37% over the last five years. Another fund guilty of having investors pay more in fees than returns.
Wasatch Frontier Emerging Small Countries Fund (WAFMX) - 2.2% expense ratio, 1.65% management fee. This fund has yielded yearly returns of -0.55% in the course of the last five years. Too bad!
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 Growth Strategies Fund K (FAGKX) is a fund that has an expense ratio of 0.41%, and a management fee of 0.38%. FAGKX is an All Cap Growth mutual fund with holdings across small, medium, and large-cap levels in order to increase diversification. With yearly returns of 10.5% over the last five years, this fund clearly wins.
DFA Enhanced US Large Company I (DFELX) has an expense ratio of 0.15% and management fee of 0.2%. DFELX is part of the Large Cap Blend section, and these mutual funds most often invest in firms with a market capitalization of $10 billion or more. By investing in bigger companies, these funds offer more stability, and are often well-suited for investors with a "buy and hold" mindset. Thanks to yearly returns of 11.63% over the last five years, DFELX is an effectively diversified fund with a long reputation of solidly positive performance.
Principal Equity Income R4 (PEIPX) has an expense ratio of 0.89% and management fee of 0.51%. PEIPX is a Large Cap Value mutual fund, which invests in stocks with a market cap of $10 billion of more, but whose share prices do not reflect their intrinsic value. With annual returns of 10.07% 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