Avoid These 3 Mutual Fund Misfires - March 10, 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.

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.

AllianzGI Global Natural Resources I (RGLIX): 1.08% expense ratio and 1.05% management fee. RGLIX 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 a five year after-costs return of -2.5%, you're for the most part paying more in charges than returns.

Goldman Sachs (NYSE:GS) Local Emerging Markets Debt A (GAMDX): 1.22% expense ratio, 0.8%. GAMDX is an International Bond - Emerging mutual fund, which focus on fixed income securities from emerging nations around the globe. This fund has yearly returns of 0.15% over the most recent five years. Another fund liable of having investors pay more in charges than what they receive in return.

Leader Short-Term Bond Fund Investor (LCCMX): Expense ratio: 1.66%. Management fee: 0.75%. LCCMX is an Investment Grade Bond - Short option; these funds focus on the short end of the curve, generally with bonds that mature in less than two years. With annual returns of just 0.07%, 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.

Fidelity Select Wireless (FWRLX): 0.81% expense ratio and 0.54% management fee. FWRLX is a Sector - Tech mutual fund, allowing investors to own a stake in a notoriously volatile sector with a much more diversified approach. With an annual return of 10.75% over the last five years, this fund is a winner.

Nicholas Limited Edition N (NNLEX) has an expense ratio of 1.15% and management fee of 0.75%. NNLEX is a Small Cap Blend mutual fund, allowing investors a way to diversify their funds among various types of small-cap stocks. With annual returns of 10.43% over the last five years, this is a well-diversified fund with a long track record of success.

Vanguard Diversified Equity Investor (VDEQX): Expense ratio: 0.35%. Management fee: 0%. VDEQX 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. VDEQX has produced a 10.76% over the last five years.

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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Zacks Investment Research