3 Mutual Fund Misfires to Avoid - April 02, 2020
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.
Rational Dividend Capture Institutional (HDCTX): This fund has an expense ratio of 1% and a management fee of 0.75%. 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. HDCTX is a Large Cap Value fund. These funds invest in stocks with a market cap of $10 billion of more, but whose share prices do not reflect their intrinsic value. The fund has lagged performance-wise, so perhaps a simpler index future investing strategy might be more effective.
Ivy Corporate Bond B (IBJBX). Expense ratio: 2.61%. Management fee: 0.75%. Over the last 5 years, this fund has generated annual returns of 1.6%.
Saratoga Energy & Basic Materials I (SEPIX): Expense ratio: 3%. Management fee: 1.25%. SEPIX is a Sector - Energy mutual fund, which encompasses a wide range of vastly changing and vitally important industries throughout this massive global sector. With annual returns of just -4%, it's no surprise this fund has received Zacks' "Strong Sell" ranking.
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.
JPMorgan Mid Cap Growth Fund R6 (JMGMX) is a winner, with an expense ratio of just 0.74% and a five-year annualized return track record of 12.26%.
Commerce Growth Fund (CFGRX) has an expense ratio of 0.75% and management fee of 0.4%. CFGRX 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. Thanks to yearly returns of 14.69% over the last five years, CFGRX is an effectively diversified fund with a long reputation of solidly positive performance.
Fidelity Advisor Technology M (FATEX) has an expense ratio of 1.28% and management fee of 0.54%. FATEX is a Sector - Tech mutual fund, allowing investors to own a stake in a notoriously volatile sector with a much more diversified approach. With yearly returns of 18.8% over the last five years, this fund is well-diversified with a long reputation of salutary performance.
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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