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Avoid These 3 Mutual Fund Misfires - January 07, 2020

Zacks Equity Research

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.

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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361 Managed Futures Strategy Investor (AMFQX): 2.14% expense ratio and 1.59% management fee. AMFQX 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 1.28%, you're for the most part paying more in charges than returns.

Legg Mason BW International Opportunities Bond FI (LWOFX). Expense ratio: 1%. Management fee: 1.59%. Over the last 5 years, this fund has generated annual returns of -0.09%.

Alpine International Real Estate A (EGALX) - 1.62% expense ratio, 1% management fee. EGALX is categorized as a Sector - Real Estate mutual fund, which typically invests in various real estate investment trusts (REIT) due to their taxation rules. EGALX has generated annual returns of 0.62% over the last five years. Ouch!

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.

Janus Henderson Enterprise Institutional (JAAGX) is a fund that has an expense ratio of 0.72%, and a management fee of 0.64%. JAAGX is a Mid Cap Growth mutual fund. Mid Cap Growth funds pick stocks--usually companies with a market cap between $2 billion and $10 billion--that demonstrate extensive growth opportunities for investors compared to their peers. With yearly returns of 15.42% over the last five years, this fund clearly wins.

MFS Growth R6 (MFEKX) has an expense ratio of 0.57% and management fee of 0.55%. MFEKX is a part of the Large Cap Growth mutual fund category, which invest in many large U.S. companies that are expected to grow much faster compared to other large-cap stocks. Thanks to yearly returns of 14.61% over the last five years, MFEKX is an effectively diversified fund with a long reputation of solidly positive performance.

Fidelity Small Cap Growth (FCPGX) has an expense ratio of 1.04% and management fee of 0.84%. FCPGX is a Small Cap Growth mutual fund and tends to feature small companies in up-and-coming industries and markets. With annual returns of 14.27% over the last five years, this fund is a well-diversified fund with a long track record of success.

Bottom Line

So, there you have it - if your advisor has you invested in any of our "Mutual Fund Misfires of the Market," there is a good probability that they are either asleep at the wheel, incompetent, or (most likely) lining their pockets with high fee commissions at your financial expense.

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