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3 Mutual Fund Misfires to Avoid - January 23, 2020

Zacks Equity Research

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.

First, let's break down some of the funds currently part of our "Mutual Fund Misfires of the Market." If you happen to have put your money into any of these misfires, we'll help assess some of our best Zacks Ranked mutual funds.

3 Mutual Fund Misfires

Now, let's take a look at three market misfires.

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Pacific Advisors Small Cap C (PGSCX): Expense ratio: 6.14%. Management fee: 0.75%. After expenses, the 5 year return is -2.07%, meaning your fees are far higher than the fund's returns.

Goldman Sachs Local Emerging Markets Debt C (GCMDX): GCMDX is an International Bond - Emerging option; these funds focus on fixed income securities from a variety of emerging international markets. GCMDX offers an expense ratio of 1.97% and annual returns of 0.22% 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.

AllianzGI Global Natural Resources A (ARMAX): Expense ratio: 1.43%. Management fee: 1.15%. ARMAX is a Global - Equity mutual fund, which invests their assets in large markets, leveraging the global economy. With annual returns of just -3.89%, it's no surprise this fund has received Zacks' "Strong Sell" ranking.

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.

Janus Henderson Research Institutional (JAGRX) is a fund that has an expense ratio of 0.58%, and a management fee of 0.48%. JAGRX 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 yearly returns of 12.32% over the last five years, this fund clearly wins.

Hartford Healthcare Fund HLS IB (HBGHX) is a stand out fund. HBGHX is classified as a Sector - Health fund. Healthcare is one of the biggest sectors of the American economy, and these kinds of mutual funds provide a great opportunity to invest in this industry. With five-year annualized performance of 10.31% and expense ratio of 1.15%, this diversified fund is an attractive buy with a strong history of performance.

DFA US Core Equity 1 I (DFEOX): Expense ratio: 0.19%. Management fee: 0.17%. DFEOX 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. DFEOX has produced a 10.44% over the last five years.

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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