3 Mutual Fund Misfires To Avoid In Your Retirement Portfolio - March 25, 2020

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.

The easiest way to judge a mutual fund's quality over time is by analyzing its performance and fees. Our Zacks Rank of over 19,000 mutual funds has identified some of the worst of the worst mutual funds you should avoid, the funds with the highest fees and poorest long-term performance.

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.

Wells Fargo (NYSE:WFC) Short Duration Government C (MSDCX): 1.56% expense ratio and 0.35% management fee. MSDCX is a Government Bond - Short fund, and these funds hold securities issued by the U.S. federal government. This category focuses on the short end of the curve, and are seen as extremely low risk securities from a default perspective. With a five year after-expenses return of 0.3%, you're mostly paying more in fees than returns.

Ivy Municipals Bond B (WMBBX): WMBBX is a Muni - Bonds fund; these funds invest in debt securities issued by states and local municipalities, which are typically used to pay for infrastructure construction, schools, and other government functions. WMBBX offers an expense ratio of 1.75% and annual returns of 1.17% 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.

Timothy Plan Fixed-Income A (TFIAX): Expense ratio: 1.13%. Management fee: 0.6%. TFIAX is an Investment Grade Bond - Intermediate fund, which targets bonds that mature in more than three years but less than 15 years, and are a middle of the curve option for investors. With annual returns of just 0.83%, 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.

Principal Capital Appreciation R3 (PCAOX): Expense ratio: 1.06%. Management fee: 0.47%. PCAOX 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 11.1%.

Franklin DynaTech R (FDNRX) has an expense ratio of 1.1% and management fee of 0.46%. FDNRX is part of the Sector - Tech mutual fund category that invests in technology and lets investors own a stake in a notoriously volatile sector, but with a much more diversified approach. With annual returns of 16.2% over the last five years, this is a well-diversified fund with a long track record of success.

Janus Henderson Enterprise A (JDMAX) has an expense ratio of 1.11% and management fee of 0.64%. JDMAX is a Mid Cap Growth mutual fund. These mutual funds choose companies with a stock market valuation between $2 billion and $10 billion. With yearly returns of 12.8% over the last five years, this fund is well-diversified with a long reputation of salutary performance.

Bottom Line

Along these lines, there you have it - if your financial guide has you put your money into any of our "Mutual Fund Misfires of the Market," there is a strong likelihood that they are either dormant at the worst possible time, inept, or (in all probability) filling their pockets with high fee commissions at the cost of your financial objectives.

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Zacks Investment Research