Opinion on American Funds

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Feb 24, 2008 9:43 am

I haven't used American Funds in the past, but recently have received a few requests for their funds.  Their operating fees are pretty low, how is their fund mgmt?

Feb 24, 2008 6:25 pm

Where have you been hiding the last 100 years lol

Feb 24, 2008 7:54 pm

r u serious?

Feb 24, 2008 8:07 pm

http://www.americanfunds.com/about/different/index.htm?r=hl



 
It's funny what a simple SEARCH will find for you.
Feb 24, 2008 9:04 pm

I would love to know how long you have been in the biz and what you have been usng to this point? By no means do I only use American, actually only a small %...but to never have heard of the largest fund mgr???

Feb 24, 2008 10:26 pm

uh, he didn't say he never heard of them. 


I know some of you guys may find this hard to believe but some people don't actually use American Funds.

Feb 25, 2008 10:03 am
Dark Knight:

uh, he didn't say he never heard of them. 


I know some of you guys may find this hard to believe but some people don't actually use American Funds.

 
That's like saying I never sell Berkshire Hathaway, or GE, or P&G, so I don't know what their management is like.  All advisors should have at least a working knowledge of the largest fund companies out there.
Feb 25, 2008 10:04 am
Star Advisor:

I haven't used American Funds in the past, but recently have received a few requests for their funds.  Their operating fees are pretty low, how is their fund mgmt?

 
Do a little research on them, read about their "story", and call your wholesaler for a presentation.  Whether or not you use them or like them, they are one of the easiest fund families to sell.
Feb 25, 2008 11:04 am

with the economy the way it is, I dont think americanfunds are timely right now. I think China or Europe funds are a better bet.

 
Feb 25, 2008 11:47 am
Lakers:

with the economy the way it is, I dont think americanfunds are timely right now. I think China or Europe funds are a better bet.

 
 
Are you serious.. ?? This comment just seems to leave a lot for the imagination.
Feb 25, 2008 11:57 am

I think the smiley winking face denotes sarcasm.

Feb 25, 2008 12:04 pm

you might not ever sell an American Fund, but how can someone be in the biz for any amount of time and not pretty much know all about them.  seems a high % of clients and potential clients would have them in their portfolio.  just seems very weird to me.

Feb 25, 2008 2:35 pm

OK, let's answer the original question. 

 
Fund managment is generally above average.  They are mostly a large cap value manager.  They are team managed.  Generally more on the conservative side.    Expenses are low because they are a huge fund company.  They keep things very simple.  If you want a sector fund, or a true satellite type fund you are going to have to use another fund family.  They are great at the core.  Good literature, but basic.  Just your bread and butter kind of family. 
 
Feel free to fill in the blanks if I missed anything of any importance.
Feb 25, 2008 4:24 pm
Spaceman Spiff:

OK, let's answer the original question. 

 
Fund managment is generally above average.  They are mostly a large cap value manager.  They are team managed.  Generally more on the conservative side.    Expenses are low because they are a huge fund company.  They keep things very simple.  If you want a sector fund, or a true satellite type fund you are going to have to use another fund family.  They are great at the core.  Good literature, but basic.  Just your bread and butter kind of family. 
 
Feel free to fill in the blanks if I missed anything of any importance.
 
They are a great "I have a REALLY big client that is conservative and I don't want to f^%$ them up" fund manager.  The old axom with them is that you will never have to apologize for putting someone into American Funds.  It's hard to really screw up with them (as long as you stick to their core funds, and your overall allocation/philosophy is sound).
As Spiff said, stick to their core value, equity income, and growth & income funds.  They are exceptional in these (boring) areas.  They are average to above average in fixed income (again, very good if you are conservative).  They are above average to excellent in global large cap value investing.  On a risk-adjusted basis, their numbers are fantastic (look at CAIBX, CWGIX, Income fund, Fundamental Investors, and a few others.
 
Also keep in mind that they do NOT stick to Style Boxes.  They manage  by objective (high current income, growing income/rising dividends, etc.).  So it is very hard to benchmark some of their better funds on an apples-apples basis.  They have sort of a go-anywhere approach with several funds, so many of their funds are international-heavy.  But since they are good value and international managers, their 5 and 10 year numbers are spectacular right now.  Their edge will start to slip as growth has come back into favor
Feb 25, 2008 4:54 pm

One of LPL's investment people, I believe it was Lincoln Anderson, started calling Growth Fund of America, "Blend Fund of the World".  Style-pure they are not, but as has been said here before, they will not generally embarrass you.

Feb 26, 2008 10:06 am

American what?  They sell mutual funds now?

Feb 26, 2008 5:22 pm
Indyone:

One of LPL's investment people, I believe it was Lincoln Anderson, started calling Growth Fund of America, "Blend Fund of the World".  Style-pure they are not, but as has been said here before, they will not generally embarrass you.

 
This is true.  You really have to run a portfolio through Instant X-Ray or something comparable to see exactly what you are getting.  They are not a strict style-box firm.  But the funds work.
 
However, in defense of Growth Fund, they have handily beat the S&P, Lipper Cap App Index, Lipper Multi-Cap Growth Index, Lipper Multi-Cap Core Index, and Lipper Growth Index over 3,5,10 and lifetime results.  And they beat 3 of those 5 this past year.  3 down years out of the past 20.  Worst 10 year period +11.4% (and this included their 2 worst years - 01 & 02).  Not a bad growth fund...Oh and they did it with less volatility.
Feb 26, 2008 6:00 pm

Thanks for the serious responses; I was actually thinking of posting this very topic but just rephrasing it.

 
Here's my big question, how diversified are they truly? I mean, when I see a trillion in assets divided among 7-10 equity mutual funds something has got to give.
 
I've seen clients have their whole portfolio in 5 american funds and often wondered whether their money was better off with options they have in their 401ks.
Feb 27, 2008 2:23 pm

They're not bad. I've done stock intersections on portfolios & they're really not bad. Every fund owns a little bit of every stock, but a diverisifed portfolio may have the largest position be at 1.25% - 1.75% in a security. My argument w/ American Funds is that they only have a couple of funds that are outside of the core box. These funds being New World & Cap Wrld Bond. I'd love to have a natural resources, real estate, and a couple of sector funds. For core, though, they're tough to knock.

Feb 27, 2008 4:32 pm
anabuhabkuss:

Thanks for the serious responses; I was actually thinking of posting this very topic but just rephrasing it.

 
Here's my big question, how diversified are they truly? I mean, when I see a trillion in assets divided among 7-10 equity mutual funds something has got to give.
 
I've seen clients have their whole portfolio in 5 american funds and often wondered whether their money was better off with options they have in their 401ks.
 
You just have to be careful what funds you pair together.  I would not buy American Mutual, Washington Mutual, ICA, and Balanced Fund in the same portfolio.  You choose one of those (though Balanced Fund is 30-40% bonds), and that gets you core Large Domestic Value exposure.  I would only pair CAIBX and CWGIX unless you are just trying to make CAIBX a little more aggressive (since the equity components are roughly the same).  CAIBX and Income Fund have different components, but the returns are highly correlated, so although you get diversification, it doesn't do much for your returns or risk profile.
 
Again, you just really have to drill down.  And I often will use soemthing like Hartford Cap App for growth, and Franklin Temp for small cap.  And I may add Mutual Shares (or other Mutual Series fund) for DEEP value. 
 
But they do have a lot of similar domestic value funds, so you have to be careful.