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Avoid These 3 Mutual Fund Misfires - 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 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.

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.

Hartford Quality Bond Fund C (HQBCX): This fund has an expense ratio of 1.56% and a management fee of 0.4%. 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. HQBCX is classified in Investment Grade Bond - Intermediate fund category; these funds target the middle section of the curve, typically by investing in bonds that mature in more than three years but less than 15 years. The fund has lagged performance-wise, so perhaps a simpler index future investing strategy might be more effective.

Pacific Advisors Balanced A (PAABX): PAABX is an Allocation Balanced mutual fund. Allocation Balanced funds look to invest across asset types, like stocks, bonds, and cash, and including precious metals or commodities is not unusual; these funds are mostly categorized by their respective asset allocation. PAABX offers an expense ratio of 6.34% and annual returns of -2.45% 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.

MainGate MLP Fund A (AMLPX): This fund has an expense ratio of 1.7% and management fee of 1.25%. AMLPX is a Sector - Energy fund, which are comprised of various changing and hugely important industries throughout the massive global energy sector. With an annual average return of -8.65% 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

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.

VALIC Company I Mid Cap Strategic Growth (VMSGX): Expense ratio: 0.81%. Management fee: 0.69%. VMSGX 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. This fund has achieved five-year annual returns of an astounding 10.57%.

JPMorgan Growth Advantage R5 (JGVRX) has an expense ratio of 0.74% and management fee of 0.55%. JGVRX is a Large Cap Growth mutual fund, and these funds invest in many large U.S. firms that are projected to grow at a faster rate than their large-cap peers. Thanks to yearly returns of 15.11% over the last five years, JGVRX is an effectively diversified fund with a long reputation of solidly positive performance.

Neuberger Berman Mid Cap Growth Investor (NMANX) has an expense ratio of 0.9% and management fee of 0.76%. NMANX is a Mid Cap Growth mutual fund. These funds aim to target companies with a market capitalization between $2 billion and $10 billion that are also expected to exhibit more extensive growth opportunities for investors than their peers. With annual returns of 10.82% over the last five years, this fund is a well-diversified fund with a long track record of success.

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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