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Is American Funds Growth Fund of America R6 (RGAGX) a Strong Mutual Fund Pick Right Now?

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On the lookout for a Large Cap Growth fund? Starting with American Funds Growth Fund of America R6 (RGAGX - Free Report) should not be a possibility at this time. RGAGX bears a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

RGAGX is classified in the Large Cap Growth segment by Zacks, an area full of possibilities. Companies are usually considered to be large-cap if their stock market valuation is more than $10 billion. Large Cap Growth mutual funds invest in many large U.S. firms that are projected to grow at a faster rate than their large-cap peers.

History of Fund/Manager

RGAGX is a part of the American Funds family of funds, a company based out of Los Angeles, CA. Since American Funds Growth Fund of America R6 made its debut in May of 2009, RGAGX has garnered more than $31.56 billion in assets. The fund is currently managed by a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. RGAGX has a 5-year annualized total return of 11.87% and is in the middle third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 16.12%, which places it in the middle third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Compared to the category average of 9.09%, the standard deviation of RGAGX over the past three years is 11.79%. The standard deviation of the fund over the past 5 years is 12.08% compared to the category average of 9.44%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of.

Investors should note that the fund has a 5-year beta of 1.02, so it is likely going to be as volatile as the market at large. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. RGAGX's 5-year performance has produced a positive alpha of 0.74, which means managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Investigating the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is largely on equities that are traded in the United States.

This fund is currently holding about 76.49% stock in stocks, with an average market capitalization of $233.17 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Other
  3. Finance
Turnover is 28%, which means, on average, the fund makes fewer trades than the average comparable fund.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, RGAGX is a no load fund. It has an expense ratio of 0.32% compared to the category average of 1.06%. Looking at the fund from a cost perspective, RGAGX is actually cheaper than its peers.

This fund requires a minimum initial investment of $250, and each subsequent investment should be at least $50.

Bottom Line

Overall, American Funds Growth Fund of America R6 ( RGAGX ) has a low Zacks Mutual Fund rank, similar performance, average downside risk, and lower fees compared to its peers.

For additional information on this product, or to compare it to other mutual funds in the Large Cap Growth, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.


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