Mutual Fund Misfires of the Market - October 24, 2019

You may need to start looking for a new financial advisor if your current one has put any of these high-fee, low-return "Mutual Fund Misfires of the Market" into your portfolio.

High fees plus poor performance: It's a pretty simple formula for a bad mutual fund. Some are worse than others - and some are so bad that they have earned a "Strong Sell" on the Zacks Rank, the lowest ranking of the nearly 19,000 mutual funds we rank daily.

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.

Wells Fargo Asset Allocation C (EACFX): 2.06% expense ratio and 0.27% management fee. EACFX is an Allocation Balanced mutual fund. Allocation Balanced funds look to invest across asset types, like stocks, bonds, and cash, and including precious metals or commodities is not unusual; these funds are mostly categorized by their respective asset allocation. With a five year after-expenses return of 1.88%, you're mostly paying more in fees than returns.

Touchstone Ultra Short Duration Fixed Income C (TSDCX): 1.19% expense ratio, 0.25% management fee. TSDCX 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. This fund has an annual returns of -0.26% over the last five years. Another fund guilty of having investors pay more in fees than returns.

BlackRock Eurofund R (MREFX) - 2.01% expense ratio, 0.75% management fee. This fund has yielded yearly returns of -0.52% in the course of the last five years. Too bad!

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.

Putnam Growth Opportunities R (PGORX) is a winner, with an expense ratio of just 0.62% and a five-year annualized return track record of 13.21%.

Neuberger Berman Real Estate Fund Trust (NBRFX): Expense ratio: 1.04%. Management fee: 1.2%. Sector - Real Estate funds like NBRFX are known to invest in real estate investment trusts (REITs). A popular income vehicle thanks to its taxation rules, a REIT is required to pay out at least 90% of its income annually to avoid double taxation. NBRFX has managed to produce a robust 10.76% over the last five years.

Fidelity Advisor Semiconductors M (FELTX) is an attractive fund with a five-year annualized return of 17.8% and an expense ratio of just 1.46%. FELTX is part of the Sector - Tech mutual fund category that invests in technology and lets investors own a stake in a notoriously volatile sector, but with a much more diversified approach.

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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Get Your Free (FELTX): Fund Analysis Report
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Zacks Investment Research

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