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Should You Invest in American Funds Growth Fund of America A (AGTHX)?

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There are plenty of choices in the Large Cap Growth category, but where should you start your research? Well, one fund that might be worth investigating is American Funds Growth Fund of America A (AGTHX - Free Report) . AGTHX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

AGTHX 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

American Funds is based in Los Angeles, CA, and is the manager of AGTHX. The American Funds Growth Fund of America A made its debut in December of 1973 and AGTHX has managed to accumulate roughly $78.28 billion in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 16.19%, and it sits in the middle third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 12.1%, 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. The standard deviation of AGTHX over the past three years is 10.63% compared to the category average of 8.83%. The fund's standard deviation over the past 5 years is 10% compared to the category average of 10.91%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

It's always important to be aware of the downsides to any future investment, so one should not discount the risks that come with this segment. AGTHX lost 48.8% in the most recent bear market and outperformed its peer group by 0.08%. This could mean that the fund is a better choice than comparable funds during a bear market.

And for investors concerned about the potential drawdown in a really bad calendar year, we can look back to 2008 for that figure. In its worst calendar year in a decade, the fund lost over 39.07%.

Nevertheless, with a 5-year beta of 0.98, the fund is likely to be as volatile as 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. The fund has produced a positive alpha over the past 5 years of 1.22, which shows that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Exploring 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.

The mutual fund currently has 91.27% of its holdings in stocks, which have an average market capitalization of $187.99 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Other
  3. Finance

With turnover at about 26%, this 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, AGTHX is a load fund. It has an expense ratio of 0.65% compared to the category average of 1.14%. AGTHX is actually cheaper than its peers when you consider factors like cost.

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 Growth Fund of America A AGTHX has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, American Funds Growth Fund of America A AGTHX looks like a good potential choice for investors right now.

This could just be the start of your research on AGTHX in the Large Cap Growth 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. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.


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