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Mutual Fund Misfires of the Market - February 11, 2020

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 plus poor performance: It's a pretty simple formula for a bad mutual fund. Some are worse than others - and some are so bad that they have earned a "Strong Sell" on the Zacks Rank, the lowest ranking of the nearly 19,000 mutual funds we rank daily.

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.

FPA Capital Fund (FPPTX): This fund has an expense ratio of 0.89% and a management fee of 0.67%. 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. FPPTX is a Small Cap Value mutual fund, investing in small companies with stock market valuation less than $2 billion. The fund has lagged performance-wise, so perhaps a simpler index future investing strategy might be more effective.

Intrepid Capital Fund Investor (ICMBX): ICMBX is a part of the Allocation Balanced fund category; these funds like to invest in a variety of asset types, finding a balance between stocks, bonds, cash, and sometimes even precious metals and commodities; they are mostly categorized by their respective asset allocation. ICMBX offers an expense ratio of 1.4% and annual returns of 1.36% 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.

Federated International Bond A (FTIIX) - 1.02% expense ratio, 0.75% management fee. This fund has yielded yearly returns of -0.12% in the course of the last five years. Too bad!

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.

MFS Research R3 (MFRHX): 0.8% expense ratio and 0.43% management fee. MFRHX is a Large Cap Growth mutual fund, and these funds invest in many large U.S. firms that are projected to grow at a faster rate than their large-cap peers. With an annual return of 11.45% over the last five years, this fund is a winner.

MassMutual Select Mid Cap Growth A (MEFAX) has an expense ratio of 1.26% and management fee of 0.69%. MEFAX is a Mid Cap Growth mutual fund. These mutual funds choose companies with a stock market valuation between $2 billion and $10 billion. With annual returns of 11.23% over the last five years, this is a well-diversified fund with a long track record of success.

Victory Sycamore Established Value Y (VEVYX) has an expense ratio of 0.62% and management fee of 0.45%. VEVYX is a Mid Cap Value fund, which usually invests in companies with a stock market valuation between $2 billion and $10 billion. With yearly returns of 10.4% over the last five years, this fund is well-diversified with a long reputation of salutary performance.

Bottom Line

So, there you have it - if your advisor has you invested in any of our "Mutual Fund Misfires of the Market," there is a good probability that they are either asleep at the wheel, incompetent, or (most likely) lining their pockets with high fee commissions at your financial expense.

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