American Funds, part of the Capital Group, holds assets worth $1.69 billion as of Apr 30, 2018. It emphasized in improving its active strategies to become the biggest active fund manager, superseding Fidelity. Moreover, the company also focuses 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, investing in American Funds seems prudent.
American Funds in Q1
The second-biggest fund family of the United States increased dividend payment for its fundamental investors over the last year. Moreover, around 41.6% American Funds mutual funds has no front or back-end sales load.
As of Apr 30, 2018, total returns of the fund family were around 0.6%, which is more than the category average of 0%. Also, its trailing returns for the year-to-date (YTD) period is 0.62%, while its annual turnover is 47%.The minimum initial investment of the American Funds mutual funds is $0 to $250.
Further, one of the best-performing mutual funds from the American Funds family is American Funds 2025 Trgt Date Retire R5 (REDTX). REDTX, which invests a bulk of its assets in a plethora of fund categories such as growth funds, growth-and-income funds, equity-income funds and balanced fund, returned 9.9% in the past year.
According to Morningstar, American Funds 2020 Target Date Retirement R5 (RECTX) and American Funds 2025 Target Date Retirement R5 have come up with the best performance in the past 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.
Jerome Powell in his first speech as the Fed Chairman said that the economy has registered strong growth and that gradual rate increases are necessary. Additionally, incoming New York Fed Chief or Fed Vice-Chair John Williams echoed Powell. Moreover, some of the policymakers now expect not just two but even three more rate hikes in 2018.
The high-rate environment bodes well for financial companies including banks, money managers, insurance firms and brokerage companies.
Moreover, GOP’s landmark Tax Bill has also boosted the fortunes of both technology and healthcare sectors. A one-time low tax rate on foreign profits will help multinationals including large tech giants to bring funds held overseas back to the United States. Bringing back massive overseas cash pile will help tech companies carry out a combination of share buybacks, dividend payouts and M&A activities.
Further, venture capital funding in the healthcare sector rose 21% from last year’s fourth-quarter figure and 4% year over year, with Pacific Northwest being the major contributor. Bio-pharma companies constituted around 50% of the total venture capital funding, boosted by innovations in gene editing and cell therapies.
Buy These 4 American Mutual Funds
American Funds’ focus on providing low cost mutual funds with strong returns, have brought investors’ attention back to this fund family.
We have, thus, selected four best-performing American Funds mutual funds in the first quarter that also carry a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds provided encouraging returns in the first quarter of 2018. Additionally, the minimum initial investment is within $5000
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.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
American Funds New Economy 529A (CNGAX - Free Report) seeks appreciation of capital in the long run. The fund invests primarily in common stocks of companies that show a potential for growth and are based outside the borders of the United States. CNGAX also invests in issuers from from developing economies.
CNGAX has an annual expense ratio of 0.85%, which is below the category average of 1.10%. The fund returned 3.5% in the first quarter.
American Funds New Economy F2 (NEFFX - Free Report) seeks capital appreciation for the long run. NEFFX invests the lion's share of its assets in common stocks of companies which show a potential for growth. The fund invests in companies which can primarily benefit from innovation and advancement in new technologies.
NEFFX has an annual expense ratio of 0.57%, which is below the category average of 1.10%. The fund returned 5.7% in the first quarter.
American Funds New Economy R2 (RNGBX - Free Report) seeks appreciation of capital and income for the long run. RNGBX invests mainly in common stocks of companies that are expected to offer strong potential for growth. The fund invests a bulk of its assets in securities of companies based outside the United States.
RNGBX has an annual expense ratio of 1.56%, which is above the category average of 1.10%. The fund returned 1% in the first quarter.
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 demands of the changing global economy.
ANEFX has an annual expense ratio of 0.78%, which is below the category average of 1.10%. The fund returned 1.2% in the first quarter.
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