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.
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.
Parametric Emerging Markets C (ECEMX): Expense ratio: 2.18%. Management fee: 0.95%. After expenses, the 5 year return is 2%, meaning your fees are far higher than the fund's returns.
Saratoga Municipals Bond I (SMBPX): SMBPX is a Muni - Bonds mutual fund; these funds invest in debt securities issued by states and local municipalities, which are typically used to pay for infrastructure construction, schools, and other government functions. SMBPX offers an expense ratio of 1.7% and annual returns of -0.32% 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.
AllianzGI Global Natural Resources C (ARMCX) - 2.18% expense ratio, 1.15% management fee. ARMCX is a Global - Equity mutual fund, which invests their assets in large markets, leveraging the global economy. ARMCX has generated annual returns of -3.57% over the last five years. Ouch!
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.
MassMutual Select Mid Cap Growth R3 (MEFNX) is a winner, with an expense ratio of just 1.41% and a five-year annualized return track record of 12.3%.
GMO Quality IV (GQEFX): Expense ratio: 0.44%. Management fee: 0.44%. GQEFX 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. GQEFX has managed to produce a robust 12.08% over the last five years.
T. Rowe Price Institutional Large Cap Growth (TRLGX) is an attractive fund with a five-year annualized return of 15.9% and an expense ratio of just 0.56%. TRLGX 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.
Bottom Line
So, there you have it - if your advisor has you invested in any of our "Mutual Fund Misfires of the Market," there is a good probability that they are either asleep at the wheel, incompetent, or (most likely) lining their pockets with high fee commissions at your financial expense.
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