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Is American Funds New World A (NEWFX) a Strong Mutual Fund Pick Right Now?

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

Objective

We classify NEWFX in the Non US - Equity category, which is an area rife with potential choices. Investing in companies outside the United States is how Non US - Equity funds set themselves apart, since global funds tend to keep a good portion of their portfolio stateside. Many of these funds like to allocate across emerging and developed markets, and will often focus on all cap levels.

History of Fund/Manager

NEWFX is a part of the American Funds family of funds, a company based out of Los Angeles, CA. American Funds New World A made its debut in June of 1999, and since then, NEWFX has accumulated about $12.83 billion in assets, per the most up-to-date date available. The fund's current manager is a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 5.85%, 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 12.76%, 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, NEWFX's standard deviation comes in at 11.18%, compared to the category average of 9.84%. The fund's standard deviation over the past 5 years is 11.86% compared to the category average of 9.9%. This makes the fund more 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. NEWFX lost 53.05% in the most recent bear market and outperformed its peer group by 6%. This makes the fund a possibly better choice than its peers during a sliding market environment.

Nevertheless, with a 5-year beta of 0.8, the fund is likely to be less volatile than 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 negative alpha over the past 5 years of -2.68, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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, NEWFX is a load fund. It has an expense ratio of 1.03% compared to the category average of 1.25%. From a cost perspective, NEWFX is actually cheaper than its peers.

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 New World A ( NEWFX ) 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.

This could just be the start of your research on NEWFXin the Non US - Equity 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. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.


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