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Mutual Fund Commentary

American Funds generated outstanding returns from some of its key funds during the third quarter which got reflected in Morningstar’s 2016 “Fantastic 45” List. According to the list, out of 45 funds, 11 are under the American Funds’ family. Lower expenses, effective fund management and resilience to survive market volatility have resulted in strong fund returns.

The second biggest fund family of the U.S. was seeking more attention from investors during the quarter. During the quarter, two new fixed income funds, American Funds Emerging Markets Bond Fund and American Funds Corporate Bond Fund, were launched by the company to garner investor focus. Following the strong performance by American Funds, investing in funds from this family might be a prudent investment option.

What Boosted American Fund’s Performance?

American Fund invests in a variety of sectors that are sensitive, cyclical and defensive. From the sensitive sectors, most investments are made in the technology sector. In the cyclical sectors, the fund family invests in the financial services’ sector. The company also gained from investing in defensive sectors.

Technology Select Sector SPDR (XLK) jumped 9.9% third quarter and was the best performer among the S&P 500 sectors. Additionally, mutual funds related to this sector registered stable returns. According to Morningstar, the technology mutual fund posted a three-month positive return of 2%.

Additionally, Financial ServicesSelect Sector SPDR (XLFS) climbed 6.7% in the last quarter and was one of the biggest gainers among the S&P 500 sectors. Moreover, the financial mutual fund posted a three-month positive return of 3%, according to Morningstar.

Buy These 5 American Mutual Funds

American Funds is one of the largest and oldest mutual fund companies in the world. It has more than $1.3 trillion assets under management invested in mutual funds across a wide range of categories including both equity and fixed-income funds. This segment of Capital Group generally focuses on providing long-term returns to investors. The fund family deals with more than 40 mutual funds.

Its parent company, Capital Group currently has around $1.4 trillion assets. Founded in 1931, the company offers a wide range of financial services all over the world through its offices in different regions including North America and Europe, and 7,000 associates.

We have selected four mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy). These funds have an encouraging year-to-date (YTD) and third quarter return and minimum initial investment is within $5000. Also, these funds have low expense ratios.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

American Funds Growth Fund of America F1 (GFAFX - Free Report) seeks capital appreciation. GFAFX invests generally in equity securities of those companies, which are expected to have strong opportunities of capital growth. The fund may also invest nearly one-fourth of its assets in foreign companies.

GFAFX has an annual expense ratio of 0.71%, lower than the category average of 1.26%. The fund has YTD and third quarter returns of 2.7% and 6%, respectively. As of the last filing, Amazon.Com Inc, Broadcom Corp and Alphabet Inc were the top holdings for GFAFX.

American Funds Washington Mutual Investors F1 (WSHFX - Free Report) invests mainly in securities of companies that have strong earnings record and are listed on the New York Stock Exchange. WSHFX seeks to provide current income. The fund also offers growth of principal through sound investing.

WSHFX has an annual expense ratio of 0.66%, lower than the category average of 1.14%. The fund has YTD and third quarter returns of 4.4% and 1.3%, respectively. As of the last filing, Microsoft Corp, Home Depot Inc and Verizon Communications Inc were the top holdings for WSHFX.

American Funds American Mutual R4 (RMFEX - Free Report) seeks growth of income and capital. RMFEX invests majority of its assets in those companies that are expected to participate in progress of the U.S. economy.  The fund invests mainly in those companies that are based in the U.S. and Canada.

RMFEX has an annual expense ratio of 0.64%, lower than the category average of 1.14%. The fund has YTD and third quarter returns of 6.4% and 1.3%, respectively. As of the last filing, Verizon Communications Inc, Amgen Inc and Texas Instruments Inc were the top holdings for RMFEX.

American Funds Investment Company of America 529A (CICAX - Free Report) invests income and capital growth for the long run. CICAX invests primarily in those companies which have strong dividend-paying history. The fund may invest almost 15% of its assets in foreign companies. Further, the fund focuses on investing mainly in mid- and large-cap companies.

CICAX has an annual expense ratio of 0.69%, lower than the category average of 1.06%. The fund has YTD and third quarter returns of 7.1% and 3%, respectively. As of the last filing, Amgen Inc, Abbvie Inc and Verizon Communications Inc were the top holdings for CICAX.

American Funds AMCAP F1 (AMPFX - Free Report) seeks appreciation of capital for the long run. AMPFX invests lion’s share of its assets in companies, which have strong growth prospects. The main objective of this fund is to invest in well valued companies that have long-term investment opportunities. 

AMPFX has an annual expense ratio of 0.73%, lower than the category average of 1.26%. The fund has YTD and third quarter returns of 3% and 4.4%, respectively. As of the last filing, Amgen Inc, Netflix Inc and Oracle Group were the top holdings for AMPFX.

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