Avoid These 3 Mutual Fund Misfires - January 22, 2020

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.

Goodwood SMID Cap Long/Short Institutional (GAMIX): 1.35% expense ratio and 0.84% management fee. GAMIX is a Small Cap Growth mutual fund and tends to feature small companies in up-and-coming industries and markets. With a five year after-costs return of -2.04%, you're for the most part paying more in charges than returns.

Invesco Global Mkt Neutral R6 (MKNSX): MKNSX is a Market Neutral - Equity mutual fund. These funds attempt to maximize returns, and usually hold 50% of their securities in a long position and 50% in a short position. MKNSX offers an expense ratio of 1.24% and annual returns of -3.75% 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.

American Funds Short Term Bond Fund of America R2E (RAAEX) - 1.18% expense ratio, 0.27% management fee. This fund has yielded yearly returns of 0.1% 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.

Fidelity Advisor Growth Opportunit (FAOFX): 0.01% expense ratio and 0% management fee. FAOFX 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 an annual return of 18.84% over the last five years, this fund is a winner.

Columbia Acorn European Adv (CLOFX) has an expense ratio of 1.19% and management fee of 1.16%. CLOFX is a part of the Non US - Equity fund category, many of which will focus across all cap levels, and will typically allocate their investments between emerging and developed markets. With annual returns of 10.74% over the last five years, this is a well-diversified fund with a long track record of success.

MassMutual Select Mid Cap Growth R4 (MEFFX): Expense ratio: 1.16%. Management fee: 0.69%. MEFFX 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. MEFFX has produced a 11.93% 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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