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.
How can you tell a good mutual fund from a bad one? It's pretty basic: If the fund has high fees and performs poorly, it's not good. Of course, there's a range - but when a mutual fund earns a Zacks Rank of #5 (Strong Sell) that means it's among the worst of roughly 19,000 funds we rate each 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.
AB Allocation Market Real Return Z (AMTZX): 0.84% expense ratio and 0.75% management fee. AMTZX is classified as an Allocation Balanced fund, which seeks to invest in a balance of asset types, like stocks, bonds, and cash, and including precious metals or commodities is not unusual. With a five year after-expenses return of -2.3%, you're mostly paying more in fees than returns.
Leader Short-Term Bond Fund Institutional (LCCIX). Expense ratio: 1.16%. Management fee: 0.75%. Over the last 5 years, this fund has generated annual returns of 0.14%.
Intrepid Endurance Fund Investor (ICMAX) - 1.36% expense ratio, 1% management fee. This fund has yielded yearly returns of -0.18% 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.
JPMorgan Large Cap Growth R2 (JLGZX): Expense ratio: 1.18%. Management fee: 0.45%. JLGZX 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. This fund has achieved five-year annual returns of an astounding 12.48%.
Brown Advisory Flexible Equity Investor (BIAFX) has an expense ratio of 0.72% and management fee of 0.44%. BIAFX is classified as an Allocation Balanced fund, which seeks to invest in a balance of asset types, like stocks, bonds, and cash, and including precious metals or commodities is not unusual. With annual returns of 10.38% over the last five years, this is a well-diversified fund with a long track record of success.
Neuberger Berman Real Estate Fund I (NBRIX) has an expense ratio of 0.85% and management fee of 0.95%. Sector - Real Estate funds like NBRIX 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. With yearly returns of 10.96% over the last five years, this fund is well-diversified with a long reputation of salutary performance.
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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