Are You Invested In These 3 Mutual Fund Misfires? - October 31, 2019
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.
The easiest way to judge a mutual fund's quality over time is by analyzing its performance and fees. Our Zacks Rank of over 19,000 mutual funds has identified some of the worst of the worst mutual funds you should avoid, the funds with the highest fees and poorest long-term performance.
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.
Aquila Tax-Free Fund of Colorado C (COTCX): This fund has an expense ratio of 1.65% and a management fee of 0.5%. 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. COTCX 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. The fund has lagged performance-wise, so perhaps a simpler index future investing strategy might be more effective.
PACE International Emerging Markets Equity P (PCEMX): 1.45% expense ratio, 1%. PCEMX is a Non US - Equity option, focusing their investments acoss emerging and developed markets, and can often extend across cap levels too. This fund has yearly returns of 0.67% over the most recent five years. Another fund liable of having investors pay more in charges than what they receive in return.
Templeton Global Bond C (TEGBX): This fund has an expense ratio of 1.27% and management fee of 0.48%. TEGBX 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. With an annual average return of 0.13% over the last five years, the only thing absolute about this absolute return fund is that it absolutely deserves to be on our "worst offender" list.
3 Top Ranked Mutual Funds
Now that you've seen the worst Zacks Ranked mutual funds, let's have a look at some of the highest ranked funds with the lowest fees.
DoubleLine Shiller Enhanced CAPE I (DSEEX) is a fund that has an expense ratio of 0.55%, and a management fee of 0.45%. DSEEX 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 yearly returns of 13.96% over the last five years, this fund clearly wins.
Vanguard Tax-Managed Cap Appreciation Institutional (VTCIX) has an expense ratio of 0.06% and management fee of 0.06%. VTCIX 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 10.86% over the last five years, VTCIX is an effectively diversified fund with a long reputation of solidly positive performance.
Principal Mid Cap R4 (PMBSX) is an attractive fund with a five-year annualized return of 13.15% and an expense ratio of just 0.97%. PMBSX is a Mid Cap Growth mutual fund. These funds aim to target companies with a market capitalization between $2 billion and $10 billion that are also expected to exhibit more extensive growth opportunities for investors than their peers.
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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