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 coupled with poor results: It's a straightforward equation for an awful mutual fund. Some are more regrettable than others - and some are bad to the point that they have got a "Strong Sell" from our Zacks Rank, the lowest positioning of the almost 19,000 mutual funds we rank every 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.
PSI Market Neutral Fund A (FXMAX): 1.9% expense ratio and 1% management fee. FXMAX is a Long Short - Equity option. These funds' investment strategy consists of minimizing overall market exposure, while at the same time taking long positions in equities that are expected to appreciate and short positions in equities that are projected to decline. With a five year after-expenses return of -3.94%, you're mostly paying more in fees than returns.
Goldman Sachs (NYSE:GS) Local Emerging Markets Debt IR (GLIRX). Expense ratio: 0.96%. Management fee: 1%. Over the last 5 years, this fund has generated annual returns of -1.1%.
American Century Multi Asset Real Return C (ASIDX) - 1.14% expense ratio, 0.88% management fee. This fund has yielded yearly returns of 0.78% 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.
MFS Global Growth R6 (MWOKX): 1.05% expense ratio and 0.9% management fee. MWOKX 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. With an annual return of 11.01% over the last five years, this fund is a winner.
Loomis Sayles Small Cap Growth N (LSSNX) has an expense ratio of 0.82% and management fee of 0.75%. LSSNX is a Small Cap Growth mutual fund and tends to feature small companies in up-and-coming industries and markets. With annual returns of 11.3% over the last five years, this is a well-diversified fund with a long track record of success.
Principal Mid Cap R2 (PMBNX) is an attractive fund with a five-year annualized return of 12.74% and an expense ratio of just 1.34%. PMBNX is a Mid Cap Growth mutual fund. These funds aim to target companies with a market capitalization between $2 billion and $10 billion that are also expected to exhibit more extensive growth opportunities for investors than their peers.
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