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Is State Farm Growth Fund (STFGX) a Strong Mutual Fund Pick Right Now?

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If you've been stuck searching for Large Cap Blend funds, consider State Farm Growth Fund (STFGX - Free Report) as a possibility. STFGX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

STFGX is part of the Large Cap Blend section, an area that boasts an array of many possible options. Large Cap Blend mutual funds most often invest in firms with a market capitalization of $10 billion or more. By investing in bigger companies, these funds offer more stability, and are often well-suited for investors with a " buy and hold " mindset. Blended funds mix large, established companies into their holdings, which gives investors exposure to both value and growth at the same time.

History of Fund/Manager

State Farm is based in Bloomington, IL, and is the manager of STFGX. State Farm Growth Fund made its debut in March of 1975, and since then, STFGX has accumulated about $5.50 billion in assets, per the most up-to-date date available. The fund's current manager, Paul Eckley, has been in charge of the fund since January of 1991.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 8.41%, and is in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 11.84%, which places it in the bottom 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. Over the past three years, STFGX's standard deviation comes in at 10.75%, compared to the category average of 12.31%. Looking at the past 5 years, the fund's standard deviation is 10.7% compared to the category average of 12.09%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. In STFGX's case, the fund lost 42.39% in the most recent bear market and outperformed its peer group by 7%. This means that the fund could possibly be a better choice than its peers during a down market environment.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. STFGX has a 5-year beta of 0.86, which means it is likely to be less volatile than the market average. 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. Over the past 5 years, the fund has a negative alpha of -1.08. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, STFGX is a no load fund. It has an expense ratio of 0.12% compared to the category average of 1.03%. From a cost perspective, STFGX is actually cheaper than its peers.

Investors should also note that the minimum initial investment for the product is $250 and that each subsequent investment needs to be at $50.

Bottom Line

Overall, State Farm Growth Fund ( STFGX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a great potential choice for investors right now.

This could just be the start of your research on STFGXin the Large Cap Blend category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.


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