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Mutual Fund Misfires of the Market - January 23, 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 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.

American Century Equity & Income Market Neutral A (ALIAX): 1.63% expense ratio and 1.37% management fee. ALIAX 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. With a five year after-costs return of -2.55%, you're for the most part paying more in charges than returns.

Goldman Sachs N-11 Equity Fund C (GSYCX): GSYCX is a part of the Non US - Equity fund category, many of which will focus across all cap levels, and will typically allocate their investments between emerging and developed markets. GSYCX offers an expense ratio of 2.47% and annual returns of -3.52% 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.

America First Defensive Growth I (DGQIX): Expense ratio: 2.8%. Management fee: 1.5%. DGQIX 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. With annual returns of just -2.72%, it's no surprise this fund has received Zacks' "Strong Sell" ranking.

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.

GMO Quality IV (GQEFX): Expense ratio: 0.44%. Management fee: 0.44%. GQEFX is part of the Large Cap Blend section, and these mutual funds most often invest in firms with a market capitalization of $10 billion or more. By investing in bigger companies, these funds offer more stability, and are often well-suited for investors with a "buy and hold" mindset. This fund has achieved five-year annual returns of an astounding 12.08%.

Hartford Global Growth HLS IA (HIALX) has an expense ratio of 0.81% and management fee of 0.75%. HIALX 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. Thanks to yearly returns of 13.26% over the last five years, HIALX is an effectively diversified fund with a long reputation of solidly positive performance.

State Street Institutional Premier Growth Equity Investor (SSPGX) has an expense ratio of 0.38% and management fee of 0.37%. SSPGX 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 11.18% over the last five years, this fund is well-diversified with a long reputation of salutary performance.

Bottom Line

We hope that your investment advisor (if you use one) has you invested in one or all of the top-ranked mutual funds we've reviewed. But if that is not the case, and your advisor has you invested in any of the funds on our "worst offender" list, it might be time to have a conversation or reconsider this vitally important relationship.

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