You may need to start looking for a new financial advisor if your current one has put any of these high-fee, low-return "Mutual Fund Misfires of the Market" into your portfolio.
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.
Goldman Sachs (NYSE:GS) Dynamic Allocation IR (GDHFX): 0.91% expense ratio and 0.79% management fee. GDHFX 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. With a five year after-costs return of 0.59%, you're for the most part paying more in charges than returns.
Invesco Long/Short Equity Y (LSQYX): LSQYX 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. LSQYX offers an expense ratio of 1.33% and annual returns of 0.33% 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.
Templeton Frontier Markets A (TFMAX) - 1.96% expense ratio, 1.4% management fee. This fund has yielded yearly returns of -4.3% in the course of the last five years. Too bad!
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.
AllianzGI BestStylesU.S.EqtyFdCl R6 (ALSEX) is a fund that has an expense ratio of 0.4%, and a management fee of 0.3%. ALSEX is classified as a Large Cap Blend fund. More often than not, Large Cap Blend mutual funds invest in companies with a market cap of over $10 billion. Buying stakes in bigger companies offer these funds more stability, and are well-suited for investors with a "buy and hold" mindset. With yearly returns of 10.52% over the last five years, this fund clearly wins.
DFA US Large Cap Growth Institutional (DUSLX) is a stand out fund. DUSLX is a Large Cap Growth option; these mutual funds purchase stakes in numerous large U.S. companies that are expected to develop and grow at a faster rate than other large-cap stocks. With five-year annualized performance of 12.61% and expense ratio of 0.2%, this diversified fund is an attractive buy with a strong history of performance.
AB Discovery Growth Z (CHCZX) has an expense ratio of 0.66% and management fee of 0.61%. CHCZX is a Mid Cap Growth mutual fund. These mutual funds choose companies with a stock market valuation between $2 billion and $10 billion. With annual returns of 11.7% over the last five years, this fund is a well-diversified fund with a long track record of success.
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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Zacks Investment Research