Does Your Retirement Portfolio Hold These 3 Mutual Fund Misfires? - March 26, 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.

Victory INCORE Low Duration Bond C (RLDCX): This fund has an expense ratio of 1.62% and a management fee of 0.45%. 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. RLDCX is an Investment Grade Bond - Short fund. By investing in bonds that mature in less than two years, Investment Grade Bond - Short funds are focused on the short end of the curve. The fund has lagged performance-wise, so perhaps a simpler index future investing strategy might be more effective.

Wells Fargo (NYSE:WFC) Short Duration Government A (MSDAX): 0.81% expense ratio, 0.35%. MSDAX 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. This fund has yearly returns of 0.66% over the most recent five years. Another fund liable of having investors pay more in charges than what they receive in return.

American Funds Investor Company of America R3 (RICCX): Expense ratio: 0.94%. Management fee: 0.23%. RICCX 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. With annual returns of just -82.87%, 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.

Transamerica Large Growth R4 (TGWFX): Expense ratio: 0.9%. Management fee: 0.65%. TGWFX 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. This fund has achieved five-year annual returns of an astounding 14.22%.

T. Rowe Price Institutional Mid-Cap Equity Growth (PMEGX) has an expense ratio of 0.61% and management fee of 0.6%. PMEGX is a Mid Cap Growth mutual fund. These mutual funds choose companies with a stock market valuation between $2 billion and $10 billion. Thanks to yearly returns of 13.4% over the last five years, PMEGX is an effectively diversified fund with a long reputation of solidly positive performance.

American Funds Washington Mutual Investors F (WSHFX): Expense ratio: 0.65%. Management fee: 0.23%. WSHFX 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. WSHFX has produced a 10.52% over the last five years.

Bottom Line

So, there you have it - if your advisor has you invested in any of our "Mutual Fund Misfires of the Market," there is a good probability that they are either asleep at the wheel, incompetent, or (most likely) lining their pockets with high fee commissions at your financial expense.

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Zacks Investment Research