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Mutual Fund Misfires of the Market - December 13, 2019

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.

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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Timothy Plan Emerging Markets I (TIEMX): This fund has an expense ratio of 2.33% and a management fee of 1.2%. 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. TIEMX is a Non US - Equity fund. Many of these funds like to allocate across emerging and developed markets, and will often focus on all cap levels. The fund has lagged performance-wise, so perhaps a simpler index future investing strategy might be more effective.

BTS Tactical Fixed Income A (BTFAX): BTFAX is classified in Investment Grade Bond - Intermediate fund category; these funds target the middle section of the curve, typically by investing in bonds that mature in more than three years but less than 15 years. BTFAX offers an expense ratio of 1.49% and annual returns of 0.66% 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.

EuroPac International Bond Fund A (EPIBX) - 1.15% expense ratio, 0.6% management fee. EPIBX 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. EPIBX has generated annual returns of -2.68% over the last five years. Ouch!

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.

Principal Mid Cap R3 (PMBMX) is a fund that has an expense ratio of 1.16%, and a management fee of 0.58%. PMBMX is a Mid Cap Growth mutual fund. These mutual funds choose companies with a stock market valuation between $2 billion and $10 billion. With yearly returns of 12.94% over the last five years, this fund clearly wins.

DFA US Large Cap Growth Institutional (DUSLX) has an expense ratio of 0.2% and management fee of 0.17%. DUSLX 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 12.05% over the last five years, DUSLX is an effectively diversified fund with a long reputation of solidly positive performance.

Columbia Seligman Communications and Information R (SCIRX) has an expense ratio of 1.49% and management fee of 0.87%. With a much more diversified approach, SCIRX--part of the Sector - Tech mutual fund category--gives investors a way to own a stake in the notoriously risky tech sector. With yearly returns of 16.92% over the last five years, this fund is well-diversified with a long reputation of salutary performance.

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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Zacks Investment Research