If your advisor has you invested in any of these "Mutual Fund Misfires of the Market" with high fees and low returns, you need to rethink 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.
ClearBridge Tactical Dividend Income C (SMDLX): Expense ratio: 1.96%. Management fee: 0.75%. Total annual fee: 2.71%. After expenses, the 5 year return is 1.55%, meaning your fees are far higher than the fund's returns.
Sierra Core Retirement I (SIRIX): 1.73% expense ratio, 1.25% management fee. SIRIX 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 a combined fee of 2.98% with annual returns of 1.86% over the last five years. Another fund guilty of having investors pay more in fees than returns.
IVA International Fund A (IVIOX) - 1.26% expense ratio, 0.9% management fee. IVIOX 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. IVIOX charges a total annual fee of 2.16% and has generated annual returns of 1.28% over the last five years. Ouch!
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.
MFS Growth Fund R4 (MFEJX) is a winner, with combined fees and expenses of just 1.22% and a five-year annualized return track record of 14.44%
American Century NT Growth Institutional (ACLTX): Expense ratio: 0.63%. Management fee: 0.62%. Total annual fee: 1.25%. ACLTX 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. ACLTX has managed to produce a robust 12.86% over the last five years.
Fidelity Trend Fund (FTRNX) is an attractive fund with a five-year annualized return of 12.49% and combined fees and expenses of just 1.15%. FTRNX is a Global - Equity mutual fund, which invests their assets in large markets, leveraging the global economy.
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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Original post
Zacks Investment Research