American Funds have become an integral component of many retirement portfolios across America, but investors should be wary of their mediocre performance and associated fees.
There are much better ways of investing your money than American Funds, so if you own any, consider selling them and switching to a discount broker with great online services instead.
Target Date Retirement Series
Target date retirement series mutual funds are an innovative investment solution that automatically adjusts investments as you near retirement, moving towards more conservative options as time ticks away. You can purchase one through either a brokerage firm or your 401(k) plan sponsor, so be sure to do your research prior to investing.
American Funds is one of the oldest and best-known mutual fund families. Their funds are widely utilized by both financial professionals and individual investors alike – they can even be found within many 401(k) plans! Ideal for retirement planning due to their wide array of investment options and tax efficiency, American Funds offers customizable solutions tailored specifically to you!
Investors in American Funds contribute to its success by paying front-end loads, redemption fees and annual 12b-1 fees – charges similar to other mutual funds; however, American Funds stands out by providing Broker Dealers and their Reps incentives such as free meals, expensive gifts, prizes or conferences so that more products from American Funds are sold than from competing fund families.
Unfortunately, these incentives don’t always increase investment performance; rather they make financial advisors look greedy and lax while possibly creating conflicts of interest if paid on commission.
American Funds also charge higher fees, which can significantly diminish returns. Their front-end load and back-end load fees can reach as much as 5.75%; additionally, 12b-1 fees tend to be higher than other fund families.
Finally, investors must understand that it is impossible to achieve true diversification with American Funds alone. Since these bloated funds tend to concentrate too heavily on holdings from just a few stocks (i.e. if you hold AMCAP, Growth Fund of America and New Economy respectively), your portfolio would likely include too much Apple and Microsoft stock compared with index funds that do not become over-extended over time. A more effective alternative would be investing through an individual stock discount broker account instead.
Fundamental Investors
American Funds offers many different kinds of mutual funds to its investors. Some funds have an impressive track record while others may still be working toward reaching their goals. Some loaded funds charge fees when purchasing or selling; other no load funds don’t. Before investing, investors should carefully review each fund’s investment objectives, strategies, fees charges expenses; as well as their prospectus or statement of additional information which is available from your financial professional.
The Performance Data section presents a breakdown of each fund’s three, five and 10-year returns over time. Three year returns are weighted more heavily in calculations compared to five year and 10-year returns; an overall Morningstar Rating for each fund combines weighted averages of all three ratings over time – taking into account risk-adjusted returns as an indicator.
Some American Funds combine stocks and bonds, while others specialize in specific sectors, providing investors with multiple income and growth opportunities while mitigating market fluctuations. These funds may be an ideal choice for investors seeking diversification while at the same time mitigating risk.
Mutual fund investing can provide an easy and affordable way to diversify your portfolio without incurring costly commission fees associated with stock purchases. Furthermore, investing in mutual funds often yields higher interest rates than savings accounts from banks.
Investors can gain crucial investment information about American Funds by reading the respective prospectus and statement of Additional Information. The prospectus contains details regarding investment objectives and strategies, risks, fees and expenses as well as other essential details; copies can be obtained by consulting your Raymond James financial advisor.
American Funds’ Developing World Growth and Income Portfolio Class F-2 PGWFX seeks long-term capital appreciation. Composed of multiple American Funds with exposure to growth-oriented common stocks as well as significant allocation of shares in foreign companies, this fund features expense ratios of 1.3% and front-end loads of 3.75% for optimal performance.
Growth Fund of America
American Funds remain popular long-term investments thanks to their low fees and strong returns, making them highly attractive investments. Here are five American Funds worth considering for anyone looking for long-term investment solutions; their only drawback may be front-load fees (usually 5.75% up front); though there may be share classes which waive them altogether – make sure all options have been explored prior to making your choice!
One of the more intriguing American Funds is the Growth Fund of America (AGTHX). While managing such a massive $210 billion asset base is no easy feat, their team manages it quite successfully. While their performance may have suffered recently, this fund still provides great value at its cheapest shares.
Historical returns show this fund has produced excellent long-term returns, while its short-term performance is also outstanding. Furthermore, its average downside risk is lower than average and has earned it a high Zacks Mutual Fund Rank, making it an attractive potential choice for investors.
This open-end fund incorporated in the United States seeks to achieve capital appreciation through a disciplined investment strategy by purchasing shares of companies with superior growth prospects and financial strength. It is managed by an experienced team of professionals.
This fund is part of the S&P 500 Index and boasts an outstanding performance since 1973, boasting an expense ratio that’s relatively low and an average 5-year return of 10.7% with yield of 1.55% and beta of 0.32. Ideal for investors seeking equity funds with lower volatility and above-average dividend yield, minimum initial investment for this fund is $100,000 and it can be purchased through many brokers such as Vanguard or Fidelity; you may even find suitable plans through which you can purchase this investment option directly through 401(k). Founded by Johnston in 1973 and currently holding over $210 billion assets under management!
Balanced Fund of America
The Balanced Fund of America, part of American Funds family of mutual funds, is managed by one of the world’s premier investment management organizations: Capital Group. Operating globally with over 7,000 associates worldwide and offering financial services that span investment management, retirement planning and banking; this company oversees nearly $1 trillion allocated among various equity and fixed income funds managed by them.
This balanced fund offers a mix of stocks and bonds to provide a moderate level of risk and growth potential. The stock portion of this portfolio leans more heavily toward dividend-paying stocks from larger companies while diversification across various types of securities (with emphasis on government and investment-grade corporate debt) gives this balanced fund its diverse composition. In addition, international investments as well as real estate investment trusts are included within its offerings.
Its underlying fund primarily invests in common stocks, preferred stocks, corporate bonds and convertibles that have been rated BBB or better by Moody’s Investor Service or Standard & Poor’s Corporation; unrated securities of equivalent quality may also be invested. Furthermore, up to 12% of its assets may be allocated toward foreign securities investments; it employs a conservative investment approach and seeks long-term capital growth with income as an additional secondary goal.
Its low expense ratio also makes this fund an appealing option for investors seeking cost-cutting growth and income funds, including brokerage accounts, retirement plans and life insurance policies. Prospectus and summary prospectuses provide more information about the fund’s investment objectives, risks, fees and expenses.
American Balanced Fund’s most impressive feature is that it automatically diversifies an investor’s money among a range of stocks to reduce market risk, with particular attention paid to technology stocks which have demonstrated strong correlation with S&P 500 index over the past year.
However, its high sales load may dissuade some investors from purchasing shares. With a front-end load of 5.75% for this fund, purchasing $10,000 worth of shares requires paying an upfront payment of $575 that goes directly to your broker as part of this fee. This fee represents an inconvenient percentage of your initial investment that must be considered when choosing between funds with different sales loads.
