Avoid These 3 Mutual Fund Misfires - November 15, 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.

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.

Hartford Global Real Asset R3 (HRLRX): 1.5% expense ratio and 0.85% management fee. HRLRX is a Global - Equity mutual fund. These funds invest in large markets like the U.S., Europe, and Japan, and operate with very few geographical limitations. With a five year after-expenses return of -2.08%, you're mostly paying more in fees than returns.

Janus Henderson Emerging Markets C (HEMCX): 2.16% expense ratio, 1% management fee. HEMCX is a Non US - Equity option, focusing their investments acoss emerging and developed markets, and can often extend across cap levels too. This fund has an annual returns of -0.38% over the last five years. Another fund guilty of having investors pay more in fees than returns.

Franklin Real Return C (FRRCX): This fund has an expense ratio of 1.28% and management fee of 0.63%. FRRCX is a Government - Bonds fund, which holds securities issued by the U.S. federal government. This category stretches across the curve, meaning the yields and interest rate sensitivity will vary. With an annual average return of -0.39% over the last five years, the only thing absolute about this absolute return fund is that it absolutely deserves to be on our "worst offender" list.

3 Top Ranked Mutual Funds

There you have it: some prime examples of truly bad mutual funds. In contrast, here are a few funds that have achieved high Zacks Ranks and have low fees.

Victory Sycamore Established Value R (GETGX): Expense ratio: 1.14%. Management fee: 0.45%. GETGX is categorized as an All Cap Value fund, and like the name suggests, invests across the cap spectrum in small-cap, mid-cap, and large-cap companies. This fund has achieved five-year annual returns of an astounding 10.3%.

Janus Henderson Growth & Income T (JAGIX) is a stand out fund. JAGIX 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. With five-year annualized performance of 11.46% and expense ratio of 0.86%, this diversified fund is an attractive buy with a strong history of performance.

Eagle Mid Cap Growth R3 (HAREX) has an expense ratio of 1.3% and management fee of 0.52%. HAREX 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 11.14% over the last five years, this fund is well-diversified with a long reputation of salutary performance.

Bottom Line

We hope that your investment advisor (if you use one) has you invested in one or all of the top-ranked mutual funds we've reviewed. But if that is not the case, and your advisor has you invested in any of the funds on our "worst offender" list, it might be time to have a conversation or reconsider this vitally important relationship.

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