One of the most successful and well-known mutual fund companies in the world is American Funds. Its funds are sold by brokers, and participants in numerous 401(k) plans in the United States have access to them. In this analysis of American Funds, we will discuss the benefits and drawbacks of investing as well as the steps involved in establishing an account with a market-leading mutual fund firm.
Who would benefit most from using American Funds?
Capital Group was established in 1931 and, as of the year 2021, managed assets worth more than $2.2 trillion. American Funds is a subsidiary of Capital Group. The Capital Group has 7,800 employees working in offices located in multiple locations across the world, including North America, Europe, Asia, and Australia. These offices are spread across the globe. Their mutual funds can be purchased in a variety of ways, including through traditional brokerage firms, online discount brokers, and 401(k) retirement savings plans. Investors who are interested in purchasing high-quality mutual funds from brokers should find American Funds to be appealing. American Funds may also be a good fit for investors who are looking for the following:- Opinions from various brokers
- Above-average long-term returns
- Funds with active management charge loads (or fees) for the advisory services they provide.
- Superior investments for long-term savings vehicles, such as 401(k) plans and individual retirement accounts (IRAs).
Advantages
- Managed by seasoned industry experts.
- Counsel on investments (if funds are purchased through a broker)
- A diverse selection of high-caliber mutual funds offered in a wide range of options
- There are a variety of fund share classes to accommodate the preferences of various investors.
- Expense ratios that are significantly lower than those of other actively managed funds
Cons
- There are no index funds or sector funds available.
- Expense ratios that are higher than those of some load-free mutual funds
- Funds that are not accessible outside of 401(k) plans or through brokers.
Different Categories of Funds Offered by American Funds
Mutual funds are available from American Funds, and these funds cover seven primary categories, including:- Growth stock
- Growth-and-income
- Equity-income
- Balanced
- Taxable bond
- Tax-exempt bond
- Money market
Growth Stock Funds
The goal of growth funds is to increase capital over the course of time by purchasing stock in businesses that are well positioned for significant expansion. The following is a list of growth stock mutual funds offered by American Funds. All of the cost figures listed here and throughout this article are accurate as of September 2021. The EuroPacific Growth Fund (AEPGX) is a fund that invests primarily in European and Asian economies located in the Pacific region. These economies include both developed and developing nations. The expense ratio is 0.82 percent, the front load is 5.75 percent, and the minimum starting investment is 250 dollars. The New Economy Fund (ANEFX) makes investments in the stock of companies that are primarily focused on developing new technologies, as well as new products and services, which can contribute to the expansion of an international economy. The expense ratio is 0.76 percent, the front load is 5.75 percent, and the minimum starting investment is 250 dollars. The New Perspective Fund (ANWPX) seeks to maximize returns by investing in multinational corporations that are poised for rapid expansion. The expense ratio is 0.76 percent, the front-loading rate is 5.75 percent, and the minimum starting investment is 250 dollars. AMCAP Fund (AMCPX): Invests in well-managed U.S. companies of various sizes that have the potential for sustained and significant growth over the long term. The expense ratio is 0.68 percent, the front load is 5.75 percent, and the minimum starting investment is 250 dollars. The Growth Fund of America (AGTHX) is a mutual fund that invests in growth stocks that have the potential for long-term growth. This fund is significantly less risky than the vast majority of large-cap growth funds. The expense ratio is 0.64 percent, the front load is 5.75 percent, and the minimum starting investment is 250 dollars. Invests in companies all over the world with market capitalizations of up to $6 billion through its SMALLCAP World Fund (SMCWX) investment vehicle. The expense ratio is 1.06 percent, the front load is 5.75 percent, and the minimum initial investment is $250. Invests in newer markets and countries that have strong ties with developing economies. The New World Fund (NEWFX) is an example of this type of investment. The expense ratio is one percent, the front load is five and a half percent, and the initial investment is two hundred and fifty dollars.Growth-and-Income Funds
Funds Seeking Both Growths in Capital and Current Income Growth-and-income funds attempt to achieve both growths in capital and current income by investing in a stock that pays dividends. The following are the Growth and Income Funds offered by American Funds: Capital World Growth and Income Fund (CWGIX): This fund looks for stocks in companies all over the world that have the potential to both increase in value and continue to pay investors a steady income. The expense ratio is 0.76 percent, the front load is 5.75 percent, and the minimum starting investment is 250 dollars. The International Growth and Income Fund (IGAAX) primarily invests in large companies located in countries other than the United States of America that also distribute dividends. Holds a greater number of stocks from countries other than the United States than do other American funds with international holdings. The expense ratio is 0.91 percent, the front-loading percentage is 5.75 percent, and the initial investment is $250. The American Mutual Fund (AMRMX) is an investment vehicle that aims to maintain its principal while also pursuing current income and capital growth. Steers clear of "sin stocks," such as companies that produce alcoholic beverages or tobacco. The expense ratio is 0.59 percent, the front load is 5.75 percent, and the minimum starting investment is 250 dollars. Fundamental Investors (ANCFX) is an investment management firm that looks for value stocks that are either undervalued by the market or underappreciated by investors. Putting emphasis on growth rather than yield. The expense ratio is 0.61 percent, the front load is 5.75 percent, and the minimum starting investment is 250 dollars. The Investment Company of America (AIVSX) is the oldest fund in the lineup of American Funds. AIVSX is an owner of major, well-known companies based in the United States. The focus is on growth over the longer term rather than on income in the here and now. The expense ratio is 0.58 percent, the front load is 5.75 percent, and the minimum starting investment is 250 dollars. Before adding stocks to their portfolio, the managers of the Washington Mutual Investors Fund (AWSHX) put them through a rigorous screening process to determine whether or not they should be included. AWSHX does not typically invest in companies that make money off of tobacco or alcoholic beverages. The expense ratio is 0.58 percent, the front load is 5.75 percent, and the minimum starting investment is 250 dollars. Growth and Income in Developing Regions of the World (DWGAX) of the American Funds: focuses primarily on younger markets and economies in its search for growth and income stocks. The expense ratio comes in at 1.26 percent, the front load is 5.75 percent, and the minimum investment is 250 dollars.Funds with Both Equity and Income
Equity income funds invest in a variety of stocks and bonds that pay dividends in order to generate income and achieve growth. There are two equity-income funds offered by American Funds: Capital Income Builder (CAIBX) is a fund that, in most cases, invests in the stocks of companies that are capable of providing above-average current income. The majority of an investor's holdings will consist of the stocks of companies that have remained stable over the course of time, as well as those that either pay above-average dividends or have a high probability of producing income in the future. The maximum amount of assets that can be invested outside of the United States by CAIBX funds is fifty percent. The expense ratio is 0.61 percent, the front load is 5.75 percent, and the minimum starting investment is 250 dollars. The Income Fund of America (AMECX): This fund utilizes a versatile strategy in order to locate above-average income opportunities. It is permitted to invest up to 30 percent of its total assets in the stocks of companies located outside of the United States and up to 10 percent in fixed-income securities from other countries. It is only permitted to invest twenty percent of its total assets in high-yield bonds that have ratings lower than investment grade (BB/Ba or lower). The expense ratio is 0.57 percent, the front load is 5.75 percent, and the minimum starting investment is 250 dollars.Funds that Are Balanced
By investing in a variety of securities, most commonly stocks and bonds, balanced funds aim to maintain their initial investment while also achieving long-term growth in capital and current income. There are two balanced funds available from American Funds: GBLAX stands for the American Funds Global Balanced Fund. Invests in various countries' equities and bonds with the goals of maximizing return while protecting capital and maintaining a stable income stream. The expense ratio is 0.84 percent, the front load is 5.75 percent, and the minimum starting investment is 250 dollars. Balanced Fund of the United States (ABALX): Provides a diversified balance of high-quality stocks and bonds, with the ability to invest up to twenty percent of portfolio assets in holdings located outside the United States. The expense ratio is 0.58 percent, the front load is 5.75 percent, and the minimum starting investment is 250 dollars.Investments in taxable bonds
Bond funds that are subject to taxes aim to generate current income by investing in fixed-income securities. These funds are best suited for accounts that offer favorable tax treatment, such as 401(k)s and IRAs. The following are some of the taxable bond funds that are available from American Funds: The American High-Income Trust (AHITX) invests in high-yield bonds, which are more susceptible to market risk than traditional bonds but have the potential to generate returns similar to those of stocks. The expense ratio is 0.73 percent, the front load is 3.75 percent, and the minimum starting investment is 250 dollars. The primary focus of the investments made by the American Funds Corporate Bond Fund (BFCAX) is on higher-quality or investment-grade corporate bonds. The expense ratio is 0.83 percent, the front load is 3.75 percent, and the minimum starting investment is 250 dollars. The American Funds Emerging Markets Bond Fund, symbol EBNAX, is a mutual fund that invests in government and corporate bonds issued by emerging markets. It's possible that your bond holdings have a high yield. The expense ratio is 1.08 percent, the front-loading rate is 3.75 percent, and the minimum investment is 250 dollars. The primary focus of the investments made by the American Funds Inflation Linked Bond Fund (BFIAX) is on inflation-linked securities, such as Treasury inflation-protected securities (TIPS). This might provide investors with a current income in addition to some protection against inflation. The expense ratio is 0.70 percent, the front-loading percentage is 2.50 percent, and the initial investment is $250. The investment objective of the American Funds Strategic Bond Fund (ANBAX) is to achieve total returns that are higher than those of core bond funds while also achieving higher yields and taking on less risk than equity securities. The expense ratio is 0.81 percent, the front load is 3.75 percent, and the minimum starting investment is 250 dollars. Invests primarily in U.S. government bonds and mortgage-backed securities with an average maturity of up to three years. The Short Term Bond Fund of America (ASBAX) is a mutual fund managed by American Funds. This combination may produce higher yields than money market funds while reducing the interest rate risk associated with bond funds and resulting in a longer average maturity than bond funds. The expense ratio is 0.70 percent, the front-loading percentage is 2.50 percent, and the initial investment is $250. The majority of the assets held by the Intermediate Bond Fund of America (AIBAX) are high-quality government and corporate bonds with maturities ranging from three to five years. The expense ratio is 0.63 percent, the front load is 2.50 percent, and the minimum starting investment is $250. U.S. Government Securities Fund (AMUSX): Invests primarily in securities issued by the Treasury and other government agencies and makes an effort to reduce exposure to interest rate risk. The expense ratio is 0.66 percent, the front load is 3.75 percent, and the minimum starting investment is 250 dollars. Invests in a diversified portfolio of high-quality mortgage-related securities under the ticker symbol MFAAX. The American Funds Mortgage Fund. The expense ratio is 0.65 percent, the front load is 3.75 percent, and the minimum starting investment is 250 dollars. The Bond Fund of America (abbreviated as ABNDX) is the most diversified bond fund offered by American Funds. ABNDX is an index fund that invests in nearly all of the different segments of the bond market, with a particular emphasis on high-quality bonds. The expense ratio is 0.57 percent, the front load is 3.75 percent, and the minimum starting investment is 250 dollars. Invests primarily in government and corporate bonds in both developed and developing markets outside of the United States through its Capital World Bond Fund (CWBFX) investment strategy. The expense ratio is 0.92 percent, the front-loading percentage is 3.75 percent, and the initial investment is $250.Tax-Exempt Bond Funds
The goal of tax-exempt bond funds is to generate interest that is free from federal and state taxes by investing in municipal bonds. It is recommended that investors keep tax-exempt bond funds in taxable accounts, particularly those investors who are in higher federal tax brackets. The following are the tax-exempt bond funds offered by American Funds: The American High-Income Municipal Bond (AMHIX) exchange-traded fund primarily invests in high-yielding municipal bonds because it aims to provide tax-free income to its shareholders. The expense ratio is 0.67 percent, the front load is 3.75 percent, and the minimum starting investment is 250 dollars. Holding high-quality, short-term municipal bonds is the strategy utilized by the American Funds Short-Term Tax-Exempt Bond Fund (ASTEX), which aims to deliver a higher yield than money market funds. These securities have a maturity date of three years or less, on average. The expense ratio is 0.58 percent, the front load is 2.50 percent, and the minimum starting investment is 250 dollars. By making investments in municipal bonds issued within New York State, the American Funds Tax-Exempt Fund of New York (NYAAX) aims to provide New York residents with a source of income that is exempt from taxes at the federal, state, and New York City levels. The expense ratio is 0.67 percent, the front load is 3.75 percent, and the minimum starting investment is one thousand dollars. The Limited Term Tax-Exempt Bond Fund of America (LTEBX) is a mutual fund that invests in a wide variety of tax-exempt municipal bonds with maturities ranging from three to ten years on average and credit qualities ranging from medium to high grade (BBB and above). The expense ratio is 0.60 percent, the front load is 2.50 percent, and the minimum starting investment is 250 dollars. The Tax-Exempt Bond Fund of America (AFTEX) is the municipal bond fund offered by American Funds that offers the greatest degree of diversification. AFTEX only makes investments in bonds that are exempt from the alternative minimum tax. The expense ratio is 0.52 percent, the front load is 3.75 percent, and the minimum starting investment is $250. The goal of the Tax-Exempt Fund of California, also known as TAFTX, is to provide residents of California with a source of income that is exempt from taxes at both the federal and state levels by investing in municipal bonds issued by California municipalities. The expense ratio comes in at 0.61 percent, the front load is 3.75 percent, and the minimum investment is $1,000.Money Market Funds
There is only one money market fund available from American Funds, and that is the American Funds U.S. Government Money Market Fund (AFAXX). It is possible to withdraw your money at any time, there are no associated fees, and the growth rates are consistent even though they are low. These are all characteristics that are shared by all money market funds. Even though money market funds almost never incur principal losses, they still provide investors with a better opportunity to generate income than the majority of banks' savings accounts does. The expense ratio for this fund is 0.38 percent, and there is no load associated with it.Instructions for Purchasing American Funds
Purchases of American Funds can be made through traditional stockbrokers as well as through certain online discount brokers. In most cases, American Funds are loaded, which indicates that investors are required to pay a sales charge either when the shares are purchased (in the case of front-loaded A shares) or when the shares are sold within one year of the initial purchase (back-loaded C shares). There are also other share classes available. It is common for 401(k) plans to offer the option to buy load-waived R shares, which refers to certain funds.Assistance to Customers
Do you require assistance or have questions? Calling (800) 421-4225 from Monday through Friday between the hours of 8:00 am and 7:00 pm Eastern Standard Time will connect you with a Capital Group representative. You can call us toll-free in the United States at either (757) 670-4900 or (949) 975-5000 if you are calling from outside the country. Please call (800) 421-4225 extension 99 if you require assistance navigating the American Funds website.In Regards To American Funds
Since its founding in 1931, Capital Group, the parent company of American Funds, has been assisting a wide variety of clients, including individuals, retirees, sponsors, administrators, financial advisors, institutions, and more, in developing strategies for their long-term investment portfolios. As of the year 2021, Capital Group had over $2.2 trillion in assets under management (also known as AUM), making it one of the largest mutual fund managers in the entire world.The Advantages
American Funds is a mutual fund company that provides high-quality investments at reasonable prices. These funds can be purchased through traditional brokers, certain online discount brokers, and 401(k) plans.DRAWBACKS
Investors will typically be required to pay a sales charge for any investments that are purchased outside of a 401(k) plan. Investors who choose to manage their own portfolios may look for no-load funds that have lower expense ratios; however, unless they pay a separate fee, these investors will not receive investment advice.Questions That Are Typically Asked (FAQs)
Do American Funds outperform the market on a regular basis?
There are times when actively managed funds can outperform the market, but this is not always the case. The percentage of actively managed funds that outperformed their passive counterparts in 2021 was only 45 percent. 8 You should only choose active funds such as those in the American Funds portfolio if the opportunity to outperform the market is worth the risk that you will underperform lower-cost passive funds. Otherwise, you should stick to lower-cost passive funds.Do I need a broker to purchase American Funds, or can I do it myself?
Although purchasing American Funds through a brokerage is likely to be the most convenient method, accounts can also be obtained through the sponsors of 401(k) plans.Do American Funds offer an exchange-traded fund (ETF)?
In contrast to American Funds, which does not provide investors with exchange-traded funds (ETFs), Capital Group initiated the distribution of actively managed ETFs to investors at the beginning of 2022.