3 Mutual Fund Misfires to Avoid - February 21, 2020

Zacks Equity Research

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.

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.

AMF Ultra Short Mortgage Fund (ASARX): This fund has an expense ratio of 1.4% and a management fee of 0.45%. 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. ASARX 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. The fund has lagged performance-wise, so perhaps a simpler index future investing strategy might be more effective.

BTS Tactical Fixed Income C (BTFCX): 2.24% expense ratio, 1% management fee. BTFCX is an Investment Grade Bond - Intermediate fund, which targets bonds that mature in more than three years but less than 15 years, and are a middle of the curve option for investors. This fund has an annual returns of 1.05% over the last five years. Another fund guilty of having investors pay more in fees than returns.

BlackRock Eurofund A (MDEFX) - 1.39% expense ratio, 0.75% management fee. This fund has yielded yearly returns of 1.32% in the course of the last five years. Too bad!

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.

MFS Mass Investors Growth Stock A (MIGFX) is a fund that has an expense ratio of 0.71%, and a management fee of 0.33%. MIGFX 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. With yearly returns of 12.73% over the last five years, this fund clearly wins.

Fidelity Select Technology (FSPTX) has an expense ratio of 0.71% and management fee of 0.54%. FSPTX is a Sector - Tech mutual fund, allowing investors to own a stake in a notoriously volatile sector with a much more diversified approach. With annual returns of 19.94% over the last five years, this is a well-diversified fund with a long track record of success.

Harbor Large Cap Value Institutional (HAVLX) has an expense ratio of 0.69% and management fee of 0.6%. HAVLX is a part of the Large Cap Value category, and invests in equities with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value. With yearly returns of 12.22% over the last five years, this fund is well-diversified with a long reputation of salutary performance.

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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