Does Your Retirement Portfolio Hold These 3 Mutual Fund Misfires? - December 10, 2019
You may need to start looking for a new financial advisor if your current one has put any of these high-fee, low-return "Mutual Fund Misfires of the Market" into your portfolio.
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.
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.
Snow Capital Small Cap Value A (SNWAX): This fund has an expense ratio of 1.5% and a management fee of 0.95%. 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. SNWAX is a Small Cap Value mutual fund, investing in small companies with stock market valuation less than $2 billion. The fund has lagged performance-wise, so perhaps a simpler index future investing strategy might be more effective.
American Century Multi Asset Real Return A (ASIZX). Expense ratio: 1.89%. Management fee: 0.95%. Over the last 5 years, this fund has generated annual returns of 1.14%.
Templeton Global Bond R (FGBRX): This fund has an expense ratio of 1.12% and management fee of 0.48%. FGBRX is an International Bond - Developed mutual fund. Focusing on fixed income securities outside from developed nations besides the U.S., International Bond - Developed funds invest in assets from countries like Japan, Germany, the UK, France, and Australia. With an annual average return of 0.3% 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 you've seen the worst Zacks Ranked mutual funds, let's have a look at some of the highest ranked funds with the lowest fees.
BlackRock Advantage Large Cap Growth R (BMCRX) is a fund that has an expense ratio of 1.12%, and a management fee of 0.57%. BMCRX 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. With yearly returns of 10.27% over the last five years, this fund clearly wins.
Principal Capital Appreciation R2 (PCANX) has an expense ratio of 1.24% and management fee of 0.47%. PCANX is classified as a Large Cap Blend fund. More often than not, Large Cap Blend mutual funds invest in companies with a market cap of over $10 billion. Buying stakes in bigger companies offer these funds more stability, and are well-suited for investors with a "buy and hold" mindset. Thanks to yearly returns of 10.36% over the last five years, PCANX is an effectively diversified fund with a long reputation of solidly positive performance.
Nicholas II Fund (NCTWX) has an expense ratio of 0.61% and management fee of 0.52%. NCTWX 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 11.42% 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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