Does Your Retirement Portfolio Hold These 3 Mutual Fund Misfires? - October 30, 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.

Putnam Dynamic Risk Allocation B (PDRBX): 1.9% expense ratio and 0.72% management fee. PDRBX 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 a five year after-costs return of 1.66%, you're for the most part paying more in charges than returns.

Brandes International Small Cap Equity A (BISAX): 1.36% expense ratio, 0.95%. BISAX 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. This fund has yearly returns of -1.94% over the most recent five years. Another fund liable of having investors pay more in charges than what they receive in return.

American Funds ST Bond Fund of America C (ASBCX): Expense ratio: 1.44%. Management fee: 0.28%. ASBCX is part of the Government Bond - Short fund category. Often seen as risk-free assets, these funds hold securities issued by the U.S. federal government and they focus on the short end of the curve. With annual returns of just 0.37%, it's no surprise this fund has received Zacks' "Strong Sell" ranking.

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.

MFS Global Growth Fund I (MWOIX): Expense ratio: 1.12%. Management fee: 0.9%. MWOIX 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. This fund has achieved five-year annual returns of an astounding 10.93%.

Nationwide Geneva Small Cap Growth R6 (NWKCX): Expense ratio: 0.85%. Management fee: 0.78%. NWKCX is a Small Cap Growth mutual fund and tends to feature small companies in up-and-coming industries and markets. NWKCX has managed to produce a robust 13.63% over the last five years.

Putnam Growth Opportunities Y (PGOYX) has an expense ratio of 0.37% and management fee of 0.45%. PGOYX 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. With annual returns of 13.77% 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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