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Are You Invested In These 3 Mutual Fund Misfires? - January 23, 2020

Zacks Equity Research

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.

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.

Pacific Advisors Income & Equity C (PIECX): Expense ratio: 4.84%. Management fee: 0.75%. After expenses, the 5 year return is 2.34%, meaning your fees are far higher than the fund's returns.

Goldman Sachs Local Emerging Markets Debt A (GAMDX): 1.22% expense ratio, 0.8% management fee. GAMDX is an International Bond - Emerging option; these funds focus on fixed income securities from a variety of emerging international markets. This fund has an annual returns of 0.15% over the last five years. Another fund guilty of having investors pay more in fees than returns.

Tanaka Growth Fund (TGFRX) - 2.45% expense ratio, 1% management fee. TGFRX is a Mid Cap Growth mutual fund. These mutual funds choose companies with a stock market valuation between $2 billion and $10 billion. TGFRX has generated annual returns of 0.43% over the last five years. Ouch!

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.

Fidelity Advisor Series Equity Gr (FMFMX) is a fund that has an expense ratio of 0.01%, and a management fee of 0%. FMFMX 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 yearly returns of 14.8% over the last five years, this fund clearly wins.

Conestoga Smid Cap Institutional (CCSGX) has an expense ratio of 0.85% and management fee of 0.85%. CCSGX 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 14.8% over the last five years, this is a well-diversified fund with a long track record of success.

DFA Tax-Managed US Equity (DTMEX) has an expense ratio of 0.22% and management fee of 0.2%. DTMEX is part of the Large Cap Blend section, and these mutual funds most often invest in firms with a market capitalization of $10 billion or more. By investing in bigger companies, these funds offer more stability, and are often well-suited for investors with a "buy and hold" mindset. With yearly returns of 11.23% 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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Zacks Investment Research