American Funds witnessed total outflows of $252.5 billion from 2008 to 2016, but seemed to reach a turning point this year. Contrary to net outflow of $4.9 billion in 2016, American Funds pulled in $13.5 billion till Aug 31, 2017. Moreover, the fund family had about $1.64 trillion of assets under management as on Nov 30, 2017. American Funds emphasized improving its active strategies to become the biggest active fund manager, superseding Fidelity. Moreover, the company also focused on providing low cost funds, which will offer above-average returns.
Low expenses, effective fund management and the resilience to survive market volatility have resulted in strong fund returns for the fund family. Following the strong performance by American Funds, investing in funds from this family might be prudent in 2018.
More About American Funds
The second-biggest fund family of the United States increased the dividend payment for its fundamental investors from 15.5 cents per share to 16 cents per share for the quarter ended September. Moreover, out of all the key American Funds mutual funds, around 39.6% have no front or back-end sales load.
As of Nov 30, 2017, the total returns of the fund family were around 22.6%, which is more than the category average of 21.1%. Also, its trailing returns for the year-to-date (YTD) period is 18.76%, while its annual turnover is 44%.The minimum initial investment of the American Funds mutual funds is $250.
Additionally, in Morningstar’s 2017 “Fantastic 43” List, 13 are from the American Funds’ family. Factors like expenses, risk ratings, returns, manager ownership and stewardship were considered while identifying the best-performing mutual funds of 2017. According to Morningstar, American Funds 2020 Target Date Retirement R5 (RECTX - Free Report) and American Funds 2025 Target Date Retirement R5 (REDTX - Free Report) have come up with the best performance in the last five years among the key American Funds’ mutual funds.
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 technology. Among the cyclical sectors, it invests in financials. The fund family also gained from investing in defensive sectors like healthcare.
Technology Select Sector SPDR (XLK) has jumped 32.7% so far this year and was the best performer among the S&P 500 sectors. Additionally, mutual funds related to this sector have registered stable returns. According to Morningstar, the technology mutual fund has posted returns of 35.9% so far in 2017.
Additionally, Financial Select Sector SPDR (XLF) and Health Care Select Sector SPDR (XLV) have registered a year-to-date increase of 20.4% and 20.5%, respectively. Moreover, the financial and healthcare mutual funds posted positive returns of 17% and 25.1%, respectively, so far this year.
Buy These 5 American Mutual Funds
Founded in 1931, American Funds offers a wide range of financial services all over the world through its offices in different regions including North America and Europe. Its focus on providing low cost mutual funds with strong returns, have brought investors’ attention back to this fund family.
Here, we have selected five American Funds mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy). These funds generate encouraging year-to-date (YTD) returns 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 High-Income Municipal Bond F-1 (ABHFX - Free Report) seeks growth of income, which is free from regular federal income tax. ABHFX invests a large chunk of its assets in debt securities, interest from which is exempted from regular federal income tax. ABHFX may invest in bonds having interest which is a tax-preference item for the purpose of the federal alternative minimum tax.
ABHFX has returned 8.2% in the YTD period. Annual expense ratio of 0.75% is lower than the category average of 0.95%.
American Funds Europacific Growth Fund F1 (AEGFX - Free Report) seeks capital appreciation for the long run. AEGFX invests the lion's share of its assets in common stocks of companies based in Europe and the Pacific Basin that are expected to have potential for above-average capital growth. The fund may also invest in common stocks and other securities issued by companies based in emerging markets.
AEGFX has returned 30.1% in the YTD period. Annual expense ratio of 0.87% is lower than the category average of 1.20%.
American Funds Fundamental Investors F1 (AFIFX - Free Report) seeks appreciation of capital and income for the long run. AFIFX invests mainly in common stocks of companies that are expected to offer strong dividend income. The fund invests a bulk of its assets in securities of companies based outside the United States.
AFIFX has returned 23.4% in the YTD period. Annual expense ratio of 0.68% is lower than the category average of 1.04%.
American Funds New Economy A (ANEFX - Free Report) seeks capital growth for the long run as well as maximization of income. ANEFX invests mainly in common stocks that are expected to have strong growth potential. The fund focuses on investing in securities of those companies that are expected to benefit by exploiting new technologies or by providing products to meet the demands of the changing global economy.
ANEFX has returned 34.6% in the YTD period. Annual expense ratio of 0.81% is lower than the category average of 1.17%.
American Funds Global Growth Portfolio A (PGGAX - Free Report) seeks capital growth for the long run. PGGAX invests in a variety of American Funds in different weightings and combinations, out of which majority are growth funds. The fund will invest more than one-fourth of its assets in underlying funds that invest more than 40% of assets in foreign companies.
PGGAX has returned 27.6% in the YTD period. Annual expense ratio of 0.88% is lower than the category average of 1.20%.
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