Does Your Retirement Portfolio Hold These 3 Mutual Fund Misfires? - March 16, 2020

If your advisor has you invested in any of these "Mutual Fund Misfires of the Market" with high fees and low returns, you need to rethink your 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.

Below, you'll read about some of the funds included in our current list of "Mutual Fund Misfires of the Market." And if by chance you're invested in any of these misfires, we'll help and review some of our highest Zacks Ranked mutual funds.

3 Mutual Fund Misfires

Now, let's take a look at three market misfires.

RBC Emerging Markets Small Cap Equity I (RESIX): 1.45% expense ratio and 1.25% management fee. RESIX is a part of the Non US - Equity fund category, many of which will focus across all cap levels, and will typically allocate their investments between emerging and developed markets. With a five year after-expenses return of 0.93%, you're mostly paying more in fees than returns.

Transamerica Small Cap Core C (SCCCX): 2.01% expense ratio, 0.83%. SCCCX is a Small Cap Value fund, and these funds are known for investing in companies with market caps under $2 billion. This fund has yearly returns of 1.54% over the most recent five years. Another fund liable of having investors pay more in charges than what they receive in return.

American Funds Short Term Bond Fund of America R2E (RAAEX): Expense ratio: 1.18%. Management fee: 0.27%. RAAEX is part of the Government Bond - Short fund category. Often seen as risk-free assets, these funds hold securities issued by the U.S. federal government and they focus on the short end of the curve. With annual returns of just 0.1%, it's no surprise this fund has received Zacks' "Strong Sell" ranking.

3 Top Ranked Mutual Funds

Now that you've seen the worst Zacks Ranked mutual funds, let's have a look at some of the highest ranked funds with the lowest fees.

JPMorgan (NYSE:JPM) Small Cap Growth Fund R6 (JGSMX) is a fund that has an expense ratio of 0.74%, and a management fee of 0.65%. JGSMX is a Small Cap Growth mutual fund building their portfolio around stocks with market caps under $2 billion and large growth opportunities. With yearly returns of 14.77% over the last five years, this fund clearly wins.

Victory RS Global Growth Y (RGGYX) has an expense ratio of 0.6% and management fee of 0.8%. RGGYX is a Global - Equity mutual fund, which invests their assets in large markets, leveraging the global economy. With annual returns of 11.46% over the last five years, this is a well-diversified fund with a long track record of success.

Fidelity Strategic Advisers Growth Fund (FSGFX) has an expense ratio of 0.13% and management fee of 0.36%. FSGFX 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 12.66% over the last five years, this fund is a well-diversified fund with a long track record of success.

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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Zacks Investment Research