Are You Invested In These 3 Mutual Fund Misfires? - January 07, 2020

If your financial advisor made you buy any of these "Mutual Fund Misfires of the Market" with high expenses and low returns, you need to reassess your advisor.

High fees plus poor performance: It's a pretty simple formula for a bad mutual fund. Some are worse than others - and some are so bad that they have earned a "Strong Sell" on the Zacks Rank, the lowest ranking of the nearly 19,000 mutual funds we rank daily.

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.

Touchstone Ultra Short Duration Fixed Income C (TSDCX): This fund has an expense ratio of 1.19% and a management fee of 0.25%. Without even doing any in-depth analysis, just the fact that you are paying more in fees than you're earning in returns is reason enough not to invest. TSDCX 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. The fund has lagged performance-wise, so perhaps a simpler index future investing strategy might be more effective.

Transamerica Emerging Markets Equity C (CEMTX): 2.2% expense ratio, 0.92%. CEMTX 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 yearly returns of -0.59% over the most recent five years. Another fund liable of having investors pay more in charges than what they receive in return.

Ashmore Emerge Markets Local Current Bond A (ELBAX) - 1.22% expense ratio, 0.95% management fee. This fund has yielded yearly returns of -0.76% in the course of the last five years. Too bad!

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.

Conestoga Small Cap Investors (CCASX): 1.1% expense ratio and 0.9% management fee. CCASX is a Small Cap Blend mutual fund, and usually targets stocks with market caps of less than $2 billion, letting investors diversify their funds among other kinds of small-cap equities. With an annual return of 15.31% over the last five years, this fund is a winner.

MFS Research R5 (MFRKX) has an expense ratio of 0.48% and management fee of 0.43%. MFRKX 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. Thanks to yearly returns of 11.1% over the last five years, MFRKX is an effectively diversified fund with a long reputation of solidly positive performance.

Principal Mid Cap A (PEMGX) has an expense ratio of 0.99% and management fee of 0.58%. PEMGX 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 yearly returns of 11.94% 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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