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Is American Funds New Economy A (ANEFX) a Strong Mutual Fund Pick Right Now?

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Having trouble finding a Global - Equity fund? American Funds New Economy A (ANEFX - Free Report) is a potential starting point. ANEFX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes ANEFX as Global - Equity, which is a segment packed with options. Global - Equity mutual funds invest in large markets like the U.S., Europe, and Japan, and operate with very few geographical limitations. They also provide an investment technique that leverages the diverse nature of the global economy in the hopes of providing a stable return.

History of Fund/Manager

American Funds is based in Los Angeles, CA, and is the manager of ANEFX. The American Funds New Economy A made its debut in December of 1983 and ANEFX has managed to accumulate roughly $10.72 billion in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.

Performance

Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 16.4%, and it sits in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 12.53%, which places it in the top 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, ANEFX's standard deviation comes in at 11.49%, compared to the category average of 8.77%. The fund's standard deviation over the past 5 years is 11.02% compared to the category average of 10.56%. This makes the fund more 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 the most recent bear market, ANEFX lost 51.94% and outperformed its peer group by 0.49%. These results could imply that the fund is a better choice than its peers during a sliding market environment.

Investors should note that the fund has a 5-year beta of 0.99, so it is likely going to be as volatile as 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. ANEFX has generated a positive alpha over the past five years of 0.85, demonstrating that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Investigating 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 principally on equities that are traded in the United States.

Right now, 76.65% of this mutual fund's holdings are stocks, which have an average market capitalization of $116.26 billion. Turnover is 32%, which means, on average, the fund makes fewer trades than the average comparable fund.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, ANEFX is a load fund. It has an expense ratio of 0.79% compared to the category average of 1.20%. From a cost perspective, ANEFX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $250; each subsequent investment needs to be at least $50.

Bottom Line

Overall, American Funds New Economy A has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

Your research on the Global - Equity 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. 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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