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Avoid These 3 Mutual Fund Misfires - January 28, 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.

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.

Ivy Natural Resources R (IGNRX): Expense ratio: 1.79%. Management fee: 0.85%. After expenses, the 5 year return is -3.87%, meaning your fees are far higher than the fund's returns.

Templeton International Bond Fund A (TBOAX): 0.99% expense ratio, 0.68%. TBOAX is an International Bond - Developed mutual fund. Focusing on fixed income securities outside from developed nations besides the U.S., International Bond - Developed funds invest in assets from countries like Japan, Germany, the UK, France, and Australia. This fund has yearly returns of 0.63% over the most recent five years. Another fund liable of having investors pay more in charges than what they receive in return.

Arrow DWA Balanced Fund A (DWAFX): Expense ratio: 1.72%. Management fee: 1%. DWAFX is an Allocation Balanced mutual fund. Allocation Balanced funds look to invest across asset types, like stocks, bonds, and cash, and including precious metals or commodities is not unusual; these funds are mostly categorized by their respective asset allocation. With annual returns of just 0.79%, it's no surprise this fund has received Zacks' "Strong Sell" ranking.

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 Stock Selector Allocation Cap K (FSSKX): Expense ratio: 0.55%. Management fee: 0.49%. FSSKX is a Large Cap Growth option; these mutual funds purchase stakes in numerous large U.S. companies that are expected to develop and grow at a faster rate than other large-cap stocks. This fund has achieved five-year annual returns of an astounding 10.76%.

MassMutual Select Mid Cap Growth Admiral (MMELX) is a stand out fund. MMELX 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 five-year annualized performance of 12.68% and expense ratio of 1.01%, this diversified fund is an attractive buy with a strong history of performance.

MFS New Discovery R3 (MNDHX): Expense ratio: 1.3%. Management fee: 0.88%. MNDHX is a Small Cap Growth mutual fund and tends to feature small companies in up-and-coming industries and markets. MNDHX has produced a 13.15% 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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