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Mutual Fund Misfires of the Market - October 18, 2019

Zacks Equity Research

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.

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.

Saratoga Municipals Bond I (SMBPX): 1.75% expense ratio and 0.55% management fee. SMBPX is a Muni - Bonds fund; these funds invest in debt securities issued by states and local municipalities, which are typically used to pay for infrastructure construction, schools, and other government functions. With a five year after-expenses return of -0.35%, you're mostly paying more in fees than returns.

Wells Fargo International Value Admiral (WFVDX): 1.27% expense ratio, 0.83%. WFVDX 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. This fund has yearly returns of 1.25% over the most recent five years. Another fund liable of having investors pay more in charges than what they receive in return.

AB Unconstrained Bond K (AGSKX) - 0.9% expense ratio, 0.5% management fee. AGSKX is classified as a Diversified Bonds fund, which offers exposure to a wide variety of fixed income types, stretching across various issuers, credit levels, and maturities. AGSKX has generated annual returns of 0.47% over the last five years. Ouch!

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.

Janus Henderson Enterprise Institutional (JAAGX): Expense ratio: 0.72%. Management fee: 0.64%. JAAGX is a Mid Cap Growth mutual fund. These mutual funds choose companies with a stock market valuation between $2 billion and $10 billion. This fund has achieved five-year annual returns of an astounding 15.42%.

JPMorgan Intrepid Growth Fund C (JCICX) has an expense ratio of 1.34% and management fee of 0.5%. JCICX 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 annual returns of 10.4% over the last five years, this is a well-diversified fund with a long track record of success.

AB Discovery Growth I (CHCIX) is an attractive fund with a five-year annualized return of 10.45% and an expense ratio of just 0.74%. CHCIX is a Mid Cap Blend mutual fund, and usually features a portfolio with stocks of various styles and sizes, allowing for diversification within a strategy that focuses on mid cap companies.

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