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Mutual Fund Misfires of the Market - 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.

American Funds ST Bond Fund of America 529A (CAAFX): This fund has an expense ratio of 0.75% and a management fee of 0.28%. 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. CAAFX is a Government Bond - Short fund, and these funds hold securities issued by the U.S. federal government. This category focuses on the short end of the curve, and are seen as extremely low risk securities from a default perspective. The fund has lagged performance-wise, so perhaps a simpler index future investing strategy might be more effective.

Principal International Emerging Markets R2 (PEASX): 1.91% expense ratio, 1.19% management fee. PEASX 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 an annual returns of 0.5% over the last five years. Another fund guilty of having investors pay more in fees than returns.

Eaton Vance Government Obligation A (EVGOX) - 1.2% expense ratio, 0.65% management fee. EVGOX is a Government Mortgage - Short mutual fund; these funds focus on the mortgage-backed securities (MBS) market and specifially, securities that have less than three years until maturity. EVGOX has generated annual returns of 0.03% over the last five years. Ouch!

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.

MFS Growth Fund A (MFEGX): Expense ratio: 0.9%. Management fee: 0.55%. MFEGX is an All Cap Growth mutual fund. In order to increase diversification, these funds have holdings across small, medium, and large-cap levels. This fund has achieved five-year annual returns of an astounding 12.95%.

Fidelity Blue Chip Growth (FBGRX): Expense ratio: 0.8%. Management fee: 0.64%. FBGRX 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. FBGRX has managed to produce a robust 12.9% over the last five years.

ClearBridge Small Cap Growth 1 (LMPMX) has an expense ratio of 0.94% and management fee of 0.75%. LMPMX 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 yearly returns of 10.97% over the last five years, this fund is well-diversified with a long reputation of salutary performance.

Bottom Line

We hope that your investment advisor (if you use one) has you invested in one or all of the top-ranked mutual funds we've reviewed. But if that is not the case, and your advisor has you invested in any of the funds on our "worst offender" list, it might be time to have a conversation or reconsider this vitally important relationship.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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