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 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.
Ashmore Emerge Markets Local Current Bond C (ELBCX): 1.97% expense ratio and 0.95% management fee. ELBCX is an International Bond - Emerging mutual fund, which focus on fixed income securities from emerging nations around the globe. With a five year after-expenses return of 1.65%, you're mostly paying more in fees than returns.
Templeton International Bond Fund C (FCNBX): 1.39% expense ratio, 0.68%. FCNBX is an International Bond - Developed fund, and these funds funds focus on fixed income securities from developed nations apart from the United States. This usually results in countries like Japan, Germany, the UK, France, and Australia dominating the list of top holdings. This fund has yearly returns of 0.97% over the most recent five years. Another fund liable of having investors pay more in charges than what they receive in return.
Transamerica Emerging Markets Equity A (AEMTX) - 1.59% expense ratio, 0.92% management fee. This fund has yielded yearly returns of 1.4% in the course of the last five years. Too bad!
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.
RMB Dividend Growth I (RMBDX): 0.8% expense ratio and 0.65% management fee. RMBDX is a part of the Large Cap Growth mutual fund category, which invest in many large U.S. companies that are expected to grow much faster compared to other large-cap stocks. With an annual return of 11.75% over the last five years, this fund is a winner.
Russell Select US Equity Y (RTDYX) has an expense ratio of 0.38% and management fee of 0.3%. RTDYX 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. Thanks to yearly returns of 10.99% over the last five years, RTDYX is an effectively diversified fund with a long reputation of solidly positive performance.
Polen Global Growth Instl (PGIIX) has an expense ratio of 1.1% and management fee of 0.85%. PGIIX 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 yearly returns of 14.88% 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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