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3 Mutual Fund Misfires to Avoid - January 24, 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 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.

Intrepid Endurance Fund Investor (ICMAX): 1.36% expense ratio and 1% management fee. ICMAX is a Small Cap Value mutual fund option, which typically invest in companies with market caps under $2 billion. With a five year after-costs return of 0.93%, you're for the most part paying more in charges than returns.

Eaton Vance Government Obligation A (EVGOX): EVGOX is part of the Government Mortgage - Short fund section. Government Mortgage - Short funds focus on the mortgage-backed security (MBS) market and securities that usually have less than three years until maturity. EVGOX offers an expense ratio of 1.2% and annual returns of 0% over the last five years. Even if this fund can be positioned as a hedge during the recent bull-market, paying more in fees than returns over the long-term should never be an acceptable result.

Loomis Sayles Limited Term G&A A (NEFLX): This fund has an expense ratio of 0.8% and management fee of 0.37%. NEFLX is part of the Government Bond - Short fund category. Often seen as risk-free assets, these funds hold securities issued by the U.S. federal government and they focus on the short end of the curve. With an annual average return of 0.74% over the last five years, the only thing absolute about this absolute return fund is that it absolutely deserves to be on our "worst offender" list.

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.

Oppenheimer Gold & Special Mineral A (OPGSX) is a winner, with an expense ratio of just 1.17% and a five-year annualized return track record of 10.05%.

JPMorgan Small Cap Growth I (OGGFX) has an expense ratio of 0.99% and management fee of 0.65%. OGGFX is a Small Cap Growth mutual fund and tends to feature small companies in up-and-coming industries and markets. With annual returns of 14.48% over the last five years, this is a well-diversified fund with a long track record of success.

Fidelity Select Electronics (FSELX) has an expense ratio of 0.73% and management fee of 0.54%. FSELX is a Sector - Tech mutual fund, allowing investors to own a stake in a notoriously volatile sector with a much more diversified approach. With yearly returns of 21.56% over the last five years, this fund is well-diversified with a long reputation of salutary performance.

Bottom Line

Along these lines, there you have it - if your financial guide has you put your money into any of our "Mutual Fund Misfires of the Market," there is a strong likelihood that they are either dormant at the worst possible time, inept, or (in all probability) filling their pockets with high fee commissions at the cost of your financial objectives.

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