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Mutual Fund Misfires of the Market - January 24, 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 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.

Saratoga International Equity I (SIEPX): Expense ratio: 1.25%. Management fee: 0.75%. After expenses, the 5 year return is 0.41%, meaning your fees are far higher than the fund's returns.

American Funds ST Bond Fund of America R4 (RAMEX). Expense ratio: 0.69%. Management fee: 0.75%. Over the last 5 years, this fund has generated annual returns of 0.65%.

Templeton Global Balanced Fund A (TAGBX): Expense ratio: 1.2%. Management fee: 0.73%. TAGBX 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. With annual returns of just 1.18%, it's no surprise this fund has received Zacks' "Strong Sell" ranking.

3 Top Ranked Mutual Funds

Since you've seen the most noticeably lowest Zacks Ranked mutual funds, how about we take a look at some of the top ranked mutual funds with the least fees.

Nuance Mid Cap Value Fund Institutional (NMVLX): 0.93% expense ratio and 0.75% management fee. NMVLX is a Mid Cap Value fund, which usually invests in companies with a stock market valuation between $2 billion and $10 billion. With an annual return of 11.88% over the last five years, this fund is a winner.

Fidelity Growth Strategies Fund (FDEGX): Expense ratio: 0.54%. Management fee: 0.38%. FDEGX is an All Cap Growth mutual fund. In order to increase diversification, these funds have holdings across small, medium, and large-cap levels. FDEGX has managed to produce a robust 10.35% over the last five years.

Royce International Premier Fund Investment (RIPNX) has an expense ratio of 1.13% and management fee of 1%. RIPNX 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. With yearly returns of 13.03% over the last five years, this fund is well-diversified with a long reputation of salutary performance.

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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