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Mutual Fund Misfires of the Market - April 06, 2020

Zacks Equity Research
·4 min read

If your advisor has you invested in any of these "Mutual Fund Misfires of the Market" with high fees and low returns, you need to rethink your advisor.

The easiest way to judge a mutual fund's quality over time is by analyzing its performance and fees. Our Zacks Rank of over 19,000 mutual funds has identified some of the worst of the worst mutual funds you should avoid, the funds with the highest fees and poorest long-term performance.

Below, you'll read about some of the funds included in our current list of "Mutual Fund Misfires of the Market." And if by chance you're invested in any of these misfires, we'll help and review some of our highest Zacks Ranked mutual funds.

3 Mutual Fund Misfires

Now, let's take a look at three market misfires.

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MainGate MLP Fund I (IMLPX): This fund has an expense ratio of 1.44% and a management fee of 1.25%. 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. IMLPX is a Sector - Energy mutual fund, which encompasses a wide range of vastly changing and vitally important industries throughout this massive global sector. The fund has lagged performance-wise, so perhaps a simpler index future investing strategy might be more effective.

Tanaka Growth Fund (TGFRX): TGFRX 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. TGFRX offers an expense ratio of 2.45% and annual returns of 0.43% 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.

Eaton Vance Government Obligation C (ECGOX): This fund has an expense ratio of 1.99% and management fee of 0.65%. ECGOX is a Government Mortgage - Short mutual fund; these funds focus on the mortgage-backed securities (MBS) market and specifially, securities that have less than three years until maturity. With an annual average return of 0.2% 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

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.

Fidelity Fund K (FFDKX): Expense ratio: 0.4%. Management fee: 0.33%. FFDKX 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. This fund has achieved five-year annual returns of an astounding 11.26%.

American Funds Growth Fund of America 529F (CGFFX) has an expense ratio of 0.47% and management fee of 0.27%. CGFFX 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 12.55% over the last five years, this is a well-diversified fund with a long track record of success.

Harbor Large Cap Value Investor (HILVX): Expense ratio: 1.06%. Management fee: 0.6%. HILVX is a part of the Large Cap Value category, and invests in equities with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value. HILVX has produced a 11.79% over the last five years.

Bottom Line

Along these lines, there you have it - if your financial guide has you put your money into any of our "Mutual Fund Misfires of the Market," there is a strong likelihood that they are either dormant at the worst possible time, inept, or (in all probability) filling their pockets with high fee commissions at the cost of your financial objectives.

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Zacks Investment Research