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.
High fees plus poor performance: It's a pretty simple formula for a bad mutual fund. Some are worse than others - and some are so bad that they have earned a "Strong Sell" on the Zacks Rank, the lowest ranking of the nearly 19,000 mutual funds we rank daily.
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.
Leader Short-Term Bond Fund A (LCAMX): 1.66% expense ratio and 0.75% management fee. LCAMX is an Investment Grade Bond - Short fund. By investing in bonds that mature in less than two years, Investment Grade Bond - Short funds are focused on the short end of the curve. With a five year after-expenses return of -0.24%, you're mostly paying more in fees than returns.
BTS Tactical Fixed Income A (BTFAX): 1.49% expense ratio, 1% management fee. BTFAX is classified in Investment Grade Bond - Intermediate fund category; these funds target the middle section of the curve, typically by investing in bonds that mature in more than three years but less than 15 years. This fund has an annual returns of 0.81% over the last five years. Another fund guilty of having investors pay more in fees than returns.
AllianzGI Ultra Micro Cap A (GUCAX) - 1.8% expense ratio, 1.1% management fee. This fund has yielded yearly returns of 1.63% 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.
Eaton (NYSE:ETN) Vance Tax-Managed Growth 1.0 (CAPEX) is a fund that has an expense ratio of 0.48%, and a management fee of 0.45%. CAPEX 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 yearly returns of 10.98% over the last five years, this fund clearly wins.
Virtus KAR International Small-Cap I (VIISX) is a stand out fund. VIISX 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. With five-year annualized performance of 12.89% and expense ratio of 1.3%, this diversified fund is an attractive buy with a strong history of performance.
Fidelity Select Software & Company Services (FSCSX) is an attractive fund with a five-year annualized return of 19.54% and an expense ratio of just 0.71%. FSCSX is a Sector - Tech mutual fund, allowing investors to own a stake in a notoriously volatile sector with a much more diversified approach.
Bottom Line
Along these lines, there you have it - if your financial guide has you put your money into any of our "Mutual Fund Misfires of the Market," there is a strong likelihood that they are either dormant at the worst possible time, inept, or (in all probability) filling their pockets with high fee commissions at the cost of your financial objectives.
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