Avoid These 3 Mutual Fund Misfires - November 21, 2019
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.
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.
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.
Principal International Emerging Markets R3 (PEAPX): Expense ratio: 1.73%. Management fee: 1.19%. After expenses, the 5 year return is 0.69%, meaning your fees are far higher than the fund's returns.
Sierra Core Retirement A (SIRAX). Expense ratio: 1.73%. Management fee: 1.19%. Over the last 5 years, this fund has generated annual returns of 0.94%.
Catalyst Small Cap Insider Buy A (CTVAX) - 1.77% expense ratio, 1.25% management fee. This fund has yielded yearly returns of -5.28% in the course of the last five years. Too bad!
3 Top Ranked Mutual Funds
Now that we've covered our "worst offender" list, let's take a look at some of Zacks' highest ranked mutual funds with some of the lowest fees you may want to consider.
Fidelity Fund (FFIDX) is a fund that has an expense ratio of 0.49%, and a management fee of 0.33%. FFIDX 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 10.28% over the last five years, this fund clearly wins.
Lord Abbett Developing Growth F (LADFX) is a stand out fund. LADFX is one of many Small Cap Growth mutual funds; these funds tend to create their portfolios around stocks with market capitalization of less than $2 billion. With five-year annualized performance of 10.01% and expense ratio of 0.79%, this diversified fund is an attractive buy with a strong history of performance.
Value Line Mid Cap Focused Fund (VLIFX): Expense ratio: 1.1%. Management fee: 0.63%. VLIFX is a Mid Cap Growth mutual fund. These mutual funds choose companies with a stock market valuation between $2 billion and $10 billion. VLIFX has produced a 14.55% over the last five years.
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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