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Are You Invested In These 3 Mutual Fund Misfires? - January 22, 2020

Zacks Equity Research

Does your current advisor have your money invested in these "Mutual Fund Misfires of the Market" that charge high fees for low returns? If so, it may be time for a new advisor.

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.

Templeton International Bond Fund C (FCNBX): 1.39% expense ratio and 0.68% management fee. FCNBX 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. With a five year after-expenses return of 0.97%, you're mostly paying more in fees than returns.

American Funds ST Bond Fund of America R1 (RAMAX): RAMAX 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. RAMAX offers an expense ratio of 1.45% and annual returns of -0.07% 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.

Snow Capital Small Cap Value Institutional (SNWIX) - 1.25% expense ratio, 0.95% management fee. This fund has yielded yearly returns of 0.39% in the course of the last five years. Too bad!

3 Top Ranked Mutual Funds

Now that we've covered our "worst offender" list, let's take a look at some of Zacks' highest ranked mutual funds with some of the lowest fees you may want to consider.

MassMutual Select Mid Cap Growth A (MEFAX) is a fund that has an expense ratio of 1.26%, and a management fee of 0.69%. MEFAX 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 11.23% over the last five years, this fund clearly wins.

Fidelity Growth Strategies Fund K (FAGKX): Expense ratio: 0.41%. Management fee: 0.38%. FAGKX is an All Cap Growth mutual fund investing in a wide variety of equities, no matter the size of the company and as long as the firm exhibits growth characteristics. FAGKX has managed to produce a robust 10.5% over the last five years.

Royce International Premier Fund Series (RYIPX) has an expense ratio of 1.44% and management fee of 1%. RYIPX 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. With annual returns of 13.49% over the last five years, this fund is a well-diversified fund with a long track record of success.

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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Zacks Investment Research