Avoid These 3 Mutual Fund Misfires - March 27, 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.

How can you tell a good mutual fund from a bad one? It's pretty basic: If the fund has high fees and performs poorly, it's not good. Of course, there's a range - but when a mutual fund earns a Zacks Rank of #5 (Strong Sell) that means it's among the worst of roughly 19,000 funds we rate each 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.

Rydex Energy Services Investor (RYVIX): This fund has an expense ratio of 1.47% and a management fee of 0.85%. 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. RYVIX is a Sector - Energy mutual fund, which encompasses a wide range of vastly changing and vitally important industries throughout this massive global sector. The fund has lagged performance-wise, so perhaps a simpler index future investing strategy might be more effective.

Davis Government Bond A (RFBAX): RFBAX is a Government Mortgage - Short mutual fund; these funds focus on the mortgage-backed securities (MBS) market and specifially, securities that have less than three years until maturity. RFBAX offers an expense ratio of 1.05% and annual returns of -0.16% 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.

Pacific Advisors Mid Cap Value A (PAMVX): This fund has an expense ratio of 6.75% and management fee of 1%. PAMVX is a Mid Cap Blend mutual fund that typically features a portfolio filled with stocks of various sizes and styles; it allows for a diversification strategy focusing on companies with market caps between $2 billion and $10 billion. With an annual average return of -3.97% 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 we've covered our "worst offender" list, let's take a look at some of Zacks' highest ranked mutual funds with some of the lowest fees you may want to consider.

Eaton (NYSE:ETN) Vance Focused Value Opportunity I (EIFVX) is a fund that has an expense ratio of 0.8%, and a management fee of 0.75%. EIFVX is a Large Cap Value mutual fund, which invests in stocks with a market cap of $10 billion of more, but whose share prices do not reflect their intrinsic value. With yearly returns of 10.14% over the last five years, this fund clearly wins.

Hartford Stock HLS IB (HIBSX) has an expense ratio of 0.76% and management fee of 0.48%. HIBSX is a Large Cap Blend fund, targeting companies with market caps of over $10 billion. These funds offer investors a stability, and are perfect for people with a "buy and hold" mindset. Thanks to yearly returns of 11.35% over the last five years, HIBSX is an effectively diversified fund with a long reputation of solidly positive performance.

Columbia Acorn European Fund Z (CAEZX) has an expense ratio of 1.19% and management fee of 1.16%. CAEZX is a Non US - Equity option, focusing their investments acoss emerging and developed markets, and can often extend across cap levels too. With annual returns of 10.74% over the last five years, this fund is a well-diversified fund with a long track record of success.

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