Avoid These 3 Mutual Fund Misfires - December 19, 2019

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.

High fees plus poor performance: It's a pretty simple formula for a bad mutual fund. Some are worse than others - and some are so bad that they have earned a "Strong Sell" on the Zacks Rank, the lowest ranking of the nearly 19,000 mutual funds we rank daily.

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.

Legg Mason BW International Opportunities Bond A (LWOAX): 1% expense ratio and 0.5% management fee. LWOAX is a Non US - Equity option, focusing their investments acoss emerging and developed markets, and can often extend across cap levels too. With a five year after-expenses return of -0.93%, you're mostly paying more in fees than returns.

Touchstone Ultra Short Duration Fixed Income Y (TSYYX): 0.44% expense ratio, 0.25%. TSYYX is part of the Government Bond - Short fund category. Often seen as risk-free assets, these funds hold securities issued by the U.S. federal government and they focus on the short end of the curve. This fund has yearly returns of -0.26% over the most recent five years. Another fund liable of having investors pay more in charges than what they receive in return.

361 Managed Futures Strategy Investor (AMFQX) - 2.14% expense ratio, 1.59% management fee. This fund has yielded yearly returns of 1.28% 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.

AB Discovery Growth I (CHCIX): Expense ratio: 0.75%. Management fee: 0.61%. CHCIX is a Mid Cap Growth mutual fund. These mutual funds choose companies with a stock market valuation between $2 billion and $10 billion. This fund has achieved five-year annual returns of an astounding 10.45%.

Mar Vista Strategic Growth Institutional (MVSGX): Expense ratio: 0.7%. Management fee: 0.6%. MVSGX 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. MVSGX has managed to produce a robust 11.23% over the last five years.

Cohen & Steers Realty Shares Institutional (CSRIX) has an expense ratio of 0.75% and management fee of 0.75%. Sector - Real Estate funds like CSRIX are known to invest in real estate investment trusts (REITs). A popular income vehicle thanks to its taxation rules, a REIT is required to pay out at least 90% of its income annually to avoid double taxation. With annual returns of 11.61% over the last five years, this fund is a well-diversified fund with a long track record of success.

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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