Avoid These 3 Mutual Fund Misfires - March 24, 2020

If your financial advisor made you buy any of these "Mutual Fund Misfires of the Market" with high expenses and low returns, you need to reassess your 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.

America First Defensive Growth I (DGQIX): 2.8% expense ratio and 1.5% management fee. DGQIX is a Long Short - Equity mutual fund, which look at taking long positions in equities that are expected to appreciate and short positions in equities that are projected to decline, but overall, hope to minimize their market exposure. With a five year after-costs return of -2.72%, you're for the most part paying more in charges than returns.

Ascendant Deep Value Convertibles I (AEQIX): AEQIX 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. AEQIX offers an expense ratio of 1.91% and annual returns of 0.8% 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.

Hartford Quality Bond Fund C (HQBCX) - 1.56% expense ratio, 0.4% management fee. This fund has yielded yearly returns of 1.5% 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.

Diamond Hill Large Cap Fund Y (DHLYX): Expense ratio: 0.56%. Management fee: 0.5%. DHLYX 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 11.55%.

DFA US Large Cap Growth Institutional (DUSLX) has an expense ratio of 0.2% and management fee of 0.17%. DUSLX is a Large Cap Growth option; these mutual funds purchase stakes in numerous large U.S. companies that are expected to develop and grow at a faster rate than other large-cap stocks. With annual returns of 12.61% over the last five years, this is a well-diversified fund with a long track record of success.

Franklin International Growth R6 (FILRX) is an attractive fund with a five-year annualized return of 10.61% and an expense ratio of just 0.66%. FILRX is a Non US - Equity fund. Many of these funds like to allocate across emerging and developed markets, and will often focus on all cap levels.

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