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.
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.
Catalyst MLP & Infrastructure A (MLXAX): 1.68% expense ratio and 1.25% management fee. MLXAX is a Sector - Energy mutual fund, which encompasses a wide range of vastly changing and vitally important industries throughout this massive global sector. With a five year after-expenses return of -7.96%, you're mostly paying more in fees than returns.
AB Allocation Market Real Return R (AMTRX): 1.54% expense ratio, 0.75%. AMTRX is classified as an Allocation Balanced fund, which seeks to invest in a balance of asset types, like stocks, bonds, and cash, and including precious metals or commodities is not unusual. This fund has yearly returns of 0.54% over the most recent five years. Another fund liable of having investors pay more in charges than what they receive in return.
Pacific Advisors Mid Cap Value C (PMVCX) - 7.4% expense ratio, 1% management fee. This fund has yielded yearly returns of -3.6% in the course of the last five years. Too bad!
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.
Vanguard Diversified Equity Investor (VDEQX): Expense ratio: 0.35%. Management fee: 0%. VDEQX 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. This fund has achieved five-year annual returns of an astounding 10.76%.
American Funds Growth Fund of America R3 (RGACX) has an expense ratio of 0.97% and management fee of 0.27%. RGACX 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 12.02% over the last five years, this is a well-diversified fund with a long track record of success.
MSIF Global Franchise A (MSFBX): Expense ratio: 1.17%. Management fee: 0.76%. MSFBX 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. MSFBX has produced a 11.09% over the last five years.
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