Does your current advisor have your money invested in these "Mutual Fund Misfires of the Market" that charge high fees for low returns? If so, it may be time for a new 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.
American Century Short Term Government A (TWAVX): 0.81% expense ratio and 0.54% management fee. TWAVX is a Government Bond - Short fund, and these funds hold securities issued by the U.S. federal government. This category focuses on the short end of the curve, and are seen as extremely low risk securities from a default perspective. With a five year after-expenses return of 0.22%, you're mostly paying more in fees than returns.
Ivy Advantus Bond B (IBOBX): IBOBX is classified as a Diversified Bonds fund, which offers exposure to a wide variety of fixed income types, stretching across various issuers, credit levels, and maturities. IBOBX offers an expense ratio of 1.97% and annual returns of 1.95% 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.
AIG (NYSE:AIG) Commodity Strategy W (SUNWX) - 1.52% expense ratio, 1% management fee. SUNWX 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. SUNWX has generated annual returns of -2.04% over the last five years. Ouch!
3 Top Ranked Mutual Funds
Now that we've covered our "worst offender" list, let's take a look at some of Zacks' highest ranked mutual funds with some of the lowest fees you may want to consider.
American Funds Washington Mutual Investors R4 (RWMEX) is a winner, with an expense ratio of just 0.62% and a five-year annualized return track record of 10.54%.
Fidelity Select Computers (FDCPX) is a stand out fund. With a much more diversified approach, FDCPX--part of the Sector - Tech mutual fund category--gives investors a way to own a stake in the notoriously risky tech sector. With five-year annualized performance of 11.97% and expense ratio of 0.76%, this diversified fund is an attractive buy with a strong history of performance.
T. Rowe Price Blue Chip Growth R (RRBGX) has an expense ratio of 1.22% and management fee of 0.56%. RRBGX 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 yearly returns of 14.63% 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