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3 Mutual Fund Misfires to Avoid - March 11, 2020

Zacks Equity Research

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.

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.

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.

Invesco Global Mkt Neutral Fd Cl A (MKNAX): This fund has an expense ratio of 1.49% and a management fee of 0.95%. 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. MKNAX is a Market Neutral - Equity mutual fund. These portfolios usually hold 50% of their securities in a long position, as well as 50% in a short position. The fund has lagged performance-wise, so perhaps a simpler index future investing strategy might be more effective.

AQR Style Premia Alternative R6 (QSPRX): 1.4% expense ratio, 1.35%. QSPRX is a Long Short - Equity option. These funds' investment strategy consists of minimizing overall market exposure, while at the same time taking long positions in equities that are expected to appreciate and short positions in equities that are projected to decline. This fund has yearly returns of -0.41% over the most recent five years. Another fund liable of having investors pay more in charges than what they receive in return.

Guidemark Opportunity Fixed Income Service Class (GMIFX) - 1.55% expense ratio, 0.7% management fee. This fund has yielded yearly returns of 1.2% in the course of the last five years. Too bad!

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.

BlackRock Advantage Small Cap Core I (BDSIX): 0.49% expense ratio and 0.45% management fee. BDSIX is a Small Cap Blend mutual fund, and usually targets stocks with market caps of less than $2 billion, letting investors diversify their funds among other kinds of small-cap equities. With an annual return of 10.1% over the last five years, this fund is a winner.

MSIF Global Opportunity Portfolio IS (MGTSX) is a stand out fund. MGTSX is a Global - Equity mutual fund. These funds invest in large markets like the U.S., Europe, and Japan, and operate with very few geographical limitations. With five-year annualized performance of 18.03% and expense ratio of 0.84%, this diversified fund is an attractive buy with a strong history of performance.

City Natural Rochdale US Core Equity & Income N (CNRWX) has an expense ratio of 1.02% and management fee of 0.4%. CNRWX is a Large Cap Growth option; these mutual funds purchase stakes in numerous large U.S. companies that are expected to develop and grow at a faster rate than other large-cap stocks. With yearly returns of 12% over the last five years, this fund is well-diversified with a long reputation of salutary performance.

Bottom Line

So, there you have it - if your advisor has you invested in any of our "Mutual Fund Misfires of the Market," there is a good probability that they are either asleep at the wheel, incompetent, or (most likely) lining their pockets with high fee commissions at your financial expense.

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