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Avoid These 3 Mutual Fund Misfires - March 26, 2020

Zacks Equity Research

If your financial advisor made you buy any of these "Mutual Fund Misfires of the Market" with high expenses and low returns, you need to reassess your advisor.

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.

AIG US Government Securities C (NASBX): 1.64% expense ratio and 0.65% management fee. NASBX is categorized as a Government Bond - Long option, which holds securities issued by the U.S. federal government; these funds focus on the long end of the curve, which can result in higher yields but greater sensitivity to interest rate fluctuations. With a five year after-expenses return of 0.07%, you're mostly paying more in fees than returns.

AB Unconstrained Bond R (AGSRX): AGSRX is a Diversified Bonds investment option; these funds give investors exposure to a variety of fixed income types that span across different issuers, maturities, and credit levels. AGSRX offers an expense ratio of 1.15% and annual returns of 0.25% 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.

Hartford Inflation Plus C (HIPCX) - 1.6% expense ratio, 0.5% management fee. HIPCX is a Government - Bonds option, and holds securities issued by the U.S. federal government in their portfolios; these funds focus across the curve, meaning the yields and interest rate sensitivity will vary. HIPCX has generated annual returns of 1.29% over the last five years. Ouch!

3 Top Ranked Mutual Funds

Now that we've covered our "worst offender" list, let's take a look at some of Zacks' highest ranked mutual funds with some of the lowest fees you may want to consider.

Brown Advisory Growth Equity Investor (BIAGX) is a fund that has an expense ratio of 0.85%, and a management fee of 0.59%. BIAGX 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 14.8% over the last five years, this fund clearly wins.

T. Rowe Price Mid-Cap Growth Adviser (PAMCX) has an expense ratio of 1.03% and management fee of 0.61%. PAMCX is a Mid Cap Growth mutual fund. These mutual funds choose companies with a stock market valuation between $2 billion and $10 billion. With annual returns of 12.46% over the last five years, this is a well-diversified fund with a long track record of success.

Principal Small Cap Growth I R5 (PPNPX) has an expense ratio of 1.25% and management fee of 1.08%. PPNPX is one of many Small Cap Growth mutual funds; these funds tend to create their portfolios around stocks with market capitalization of less than $2 billion. With annual returns of 11.78% over the last five years, this fund is a well-diversified fund with a long track record of success.

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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