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Are You Invested In These 3 Mutual Fund Misfires? - March 04, 2020

Zacks Equity Research
·4-min read

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.

The easiest way to judge a mutual fund's quality over time is by analyzing its performance and fees. Our Zacks Rank of over 19,000 mutual funds has identified some of the worst of the worst mutual funds you should avoid, the funds with the highest fees and poorest long-term performance.

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.

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AB Allocation Market Real Return A (AMTAX): 1.3% expense ratio and 0.75% management fee. AMTAX is classified as an Allocation Balanced fund, which seeks to invest in a balance of asset types, like stocks, bonds, and cash, and including precious metals or commodities is not unusual. With a five year after-expenses return of -0.04%, you're mostly paying more in fees than returns.

Goldman Sachs N-11 Equity Fund C (GSYCX): GSYCX is a Non US - Equity option, focusing their investments acoss emerging and developed markets, and can often extend across cap levels too. GSYCX offers an expense ratio of 2.48% and annual returns of -3.52% 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.

Third Avenue Value Fund Institutional (TAVFX): This fund has an expense ratio of 1.15% and management fee of 0.9%. TAVFX is a Small Cap Value mutual fund, investing in small companies with stock market valuation less than $2 billion. With an annual average return of -1.07% 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

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.

Principal Capital Appreciation R1 (PCAMX) is a winner, with an expense ratio of just 1.37% and a five-year annualized return track record of 10.75%.

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. With annual returns of 15.37% over the last five years, this is a well-diversified fund with a long track record of success.

VY T. Rowe Price Diversified Mid Cap Growth S2 (IAXTX) has an expense ratio of 1.18% and management fee of 0.74%. IAXTX is a Mid Cap Growth mutual fund. These funds aim to target companies with a market capitalization between $2 billion and $10 billion that are also expected to exhibit more extensive growth opportunities for investors than their peers. With annual returns of 12.2% 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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