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Is American Funds Cap Income Builder A (CAIBX) a Strong Mutual Fund Pick Right Now?

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There are plenty of choices in the Large Cap Blend category, but where should you start your research? Well, one fund that may not be worth investigating is American Funds Cap Income Builder A (CAIBX - Free Report) . CAIBX has a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We note that CAIBX is a Large Cap Blend option, an area loaded with different options. More often than not, Large Cap Blend mutual funds invest in companies with a market cap of over $10 billion. Buying stakes in bigger companies offer these funds more stability, and are well-suited for investors with a " buy and hold " mindset. Additionally, blended funds mix large, more established firms into their portfolios, giving investors exposure to value and growth opportunities.

History of Fund/Manager

American Funds is responsible for CAIBX, and the company is based out of Los Angeles, CA. Since American Funds Cap Income Builder A made its debut in July of 1987, CAIBX has garnered more than $56.67 billion in assets. The fund's current manager is a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 7.25%, 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 5.15%, 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 14.87%, the standard deviation of CAIBX over the past three years is 11.47%. Looking at the past 5 years, the fund's standard deviation is 9.76% compared to the category average of 12.41%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 0.59, which means it is hypothetically less volatile than the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. The fund has produced a negative alpha over the past 5 years of -2.78, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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, CAIBX is a load fund. It has an expense ratio of 0.61% compared to the category average of 0.96%. From a cost perspective, CAIBX is actually cheaper than its peers.

While the minimum initial investment for the product is $250, investors should also note that each subsequent investment needs to be at least $50.

Bottom Line

Overall, American Funds Cap Income Builder A ( CAIBX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.

Your research on the Large Cap Blend segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.


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