NerdWallet Investing’s Dirty Dozen Mutual Funds to Avoid

NerdWallet Investing’s Dirty Dozen Mutual Funds to Avoid

Mutual Fund Word Cloud Concept in red & black

Though mutual funds are already highly diversified by nature, not all of them are a good investment. In order to find the worst performing and most expensive funds, NerdWallet Investing analyzed 13,000 of the largest mutual funds currently open to investors with at least $125 million in net assets and a net expense ratio greater than 2%, to create a list of the top 12 mutual funds to avoid.

Not only did these funds perform poorly while charging a lot in fees, they also significantly underperformed their peers that in other asset classes.

The 12 Most Expensive and Worst Performing Mutual Funds

Fund Name Symbol Style 5 year Annualized Return Net Expense Ration
1. Oppenheimer Commodity Strategy Total Return Fund (Class C) QRACX Commodities Broad Basket -14.61% 2.12%
2. Rydex Inverse Government Long Bond Strategy Fund (Class C) RYJCX Trading-Inverse Debt -13.70% 2.40%
3. Ivy Global Natural Resources Fund (Class B) IGNBX Natural Resources -12.60% 2.20%
4. Rydex Inverse S&P 500 Strategy Fund (Class C) RYUCX Bear Market -12.06% 2.42%
5. Federated Prudent Bear Fund (Class C) PBRCX Bear Market -10.48% 2.50%
6. DWS Gold & Precious Metals Fund (Class C) SGDCX Equity Precious Metals -10.16% 2.03%
7. ALPS/Red Rocks Listed Private Equity Fund (Class A) LPEFX Financial -9.45% 3.28%
8. Goldman Sachs Emerging Markets Equity Fund (Class C) GEMCX Diversified Emerging Mkts -8.84% 2.51%
9. DWS Latin America Equity Fund (Class C) SLAPX Latin America Stock -8.74% 2.53%
10. Dreyfus Emerging Markets Fund (Class C) DCPEX Diversified Emerging Mkts -8.42% 2.57%
11. Rydex Precious Metals (Class C) RYZCX Equity Precious Metals -8.27% 2.26%
12. AllianceBernstein International Value Fund (Class C) ABICX Foreign Large Value -8.07% 2.17%

Except for Rydex Inverse S&P Strategy Fund, all the funds listed above are actively managed funds. Actively managed funds have historically had a hard time beating the market index in large part due to the higher management fees charged by active managers. According to a recent NerdWallet Investing study, though active managers outperform the index by 0.12% before fees, because they then charge more in fees than the value they create, investors were left with 0.80% lower returns than index fund investors.

What Should Investors Do?

Expense Ratio: Investors should be sure to always look at a fund’s expense ratio to get a better sense of overall after-fee returns. If a fund lists an expense ratio over 2%, consider looking for a different fund.

5 Year Annualized Return: In addition, take a look at the fund’s 5 year annualized return to gain a true sense of past performance and to check whether the fund was able to consistently outperform the market.

Risk-Adjusted Return: Lastly, be sure to choose funds with a high risk-adjusted return rate.

What Are the Top Performing Funds?

To help investors, NerdWallet Investing compiled a list of the best mutual funds of the past decade by asset class and investment style.

By Neda Jafarzadeh, a financial analyst with NerdWallet Investing. NerdWallet Investing helps investors make better financial decisions including finding the best stock trading broker to trade online.