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.
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.
American Funds ST Bond Fund of America R2 (RAMBX): Expense ratio: 1.45%. Management fee: 0.28%. After expenses, the 5 year return is 0.3%, meaning your fees are far higher than the fund's returns.
James Small Cap A (JASCX): JASCX is a Small Cap Value fund, and these funds are known for investing in companies with market caps under $2 billion. JASCX offers an expense ratio of 1.5% and annual returns of 1.28% 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.
Hotchkis and Wiley Mid-Cap Value C (HWMCX): This fund has an expense ratio of 2% and management fee of 0.75%. HWMCX is a Mid Cap Value mutual funds that aims to target medium-sized companies that possess strong value and income opportunities for investors. With an annual average return of -0.95% over the last five years, the only thing absolute about this absolute return fund is that it absolutely deserves to be on our "worst offender" list.
3 Top Ranked Mutual Funds
Since you've seen the most noticeably lowest Zacks Ranked mutual funds, how about we take a look at some of the top ranked mutual funds with the least fees.
Principal Capital Appreciation R3 (PCAOX) is a fund that has an expense ratio of 1.06%, and a management fee of 0.47%. PCAOX 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. With yearly returns of 10.55% over the last five years, this fund clearly wins.
MFS Research R2 (MSRRX) has an expense ratio of 1.06% and management fee of 0.43%. MSRRX is a Large Cap Growth mutual fund, and these funds invest in many large U.S. firms that are projected to grow at a faster rate than their large-cap peers. With annual returns of 10.45% over the last five years, this is a well-diversified fund with a long track record of success.
Oppenheimer Discovery R (ODINX) has an expense ratio of 1.33% and management fee of 0.63%. ODINX is a Small Cap Growth mutual fund and tends to feature small companies in up-and-coming industries and markets. With yearly returns of 12.03% over the last five years, this fund is well-diversified with a long reputation of salutary performance.
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