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Mutual Fund Misfires of the Market - January 03, 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.

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.

BlackRock Eurofund R (MREFX): 2.01% expense ratio and 0.75% management fee. MREFX is a Europe - Equity mutual fund investing in stocks across the vast European continent. With a five year after-costs return of -0.52%, you're for the most part paying more in charges than returns.

Columbia Disciplined Small Core C (LSMCX): 2.1% expense ratio, 0.85% management fee. LSMCX is a Small Cap Value fund, and these funds are known for investing in companies with market caps under $2 billion. This fund has an annual returns of 1.1% over the last five years. Another fund guilty of having investors pay more in fees than returns.

JPMorgan International Value I (JIESX) - 0.76% expense ratio, 0.6% management fee. This fund has yielded yearly returns of -0.96% in the course of the last five years. Too bad!

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.

Eagle Mid Cap Growth I (HAGIX) is a fund that has an expense ratio of 0.74%, and a management fee of 0.52%. HAGIX 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 11.81% over the last five years, this fund clearly wins.

DFA US Large Company I (DFUSX) has an expense ratio of 0.08% and management fee of 0.06%. DFUSX 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 annual returns of 10.78% over the last five years, this is a well-diversified fund with a long track record of success.

MFS Mass Investors Growth Stock R1 (MIGMX) has an expense ratio of 1.48% and management fee of 0.33%. MIGMX 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 yearly returns of 12.75% 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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