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Are You Invested In These 3 Mutual Fund Misfires? - November 22, 2019

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.

High fees coupled with poor results: It's a straightforward equation for an awful mutual fund. Some are more regrettable than others - and some are bad to the point that they have got a "Strong Sell" from our Zacks Rank, the lowest positioning of the almost 19,000 mutual funds we rank every 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.

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Templeton Global Bond R (FGBRX): 1.12% expense ratio and 0.48% management fee. FGBRX is an International Bond - Developed fund, and these funds funds focus on fixed income securities from developed nations apart from the United States. This usually results in countries like Japan, Germany, the UK, France, and Australia dominating the list of top holdings. With a five year after-costs return of 0.3%, you're for the most part paying more in charges than returns.

BlackRock Eurofund I (MAEFX): MAEFX is a Europe - Equity mutual fund investing in stocks across the vast European continent. MAEFX offers an expense ratio of 1.17% and annual returns of 0.21% 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.

Harding Loevner Front Emerging Markets Investor (HLMOX): This fund has an expense ratio of 2% and management fee of 1.35%. HLMOX 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 an annual average return of -4.12% over the last five years, the only thing absolute about this absolute return fund is that it absolutely deserves to be on our "worst offender" list.

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.

Nuveen Winslow Large-Cap Growth A (NWCAX): 0.98% expense ratio and 0.69% management fee. NWCAX 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 an annual return of 11.08% over the last five years, this fund is a winner.

Cohen & Steers Realty Shares (CSRSX) has an expense ratio of 0.97% and management fee of 0.79%. Sector - Real Estate funds like CSRSX are known to invest in real estate investment trusts (REITs). A popular income vehicle thanks to its taxation rules, a REIT is required to pay out at least 90% of its income annually to avoid double taxation. With annual returns of 11.4% over the last five years, this is a well-diversified fund with a long track record of success.

Fidelity Select Software & Company Services (FSCSX): Expense ratio: 0.74%. Management fee: 0.54%. FSCSX is a Sector - Tech mutual fund, allowing investors to own a stake in a notoriously volatile sector with a much more diversified approach. FSCSX has produced a 18.77% 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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