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Jun 29, 2006 3:54 pm

I just picked up today's mail- in it is a new American Funds Brochure and Prospectus called the "ANNE RODDA STORY".


As a badge wearing, card carrying member of the Green Team for Jones, this always made great sense to me. Story of a woman who invested $5026 in 1957 and made withdrawls throughout her lifetime.


But today it's like I'm seeing this for the first time: inside the literature is a box giving the total return for the American Mutual fund versus it's benchmark the S & P 500. Results?


AMF  11.95%     S&P  14.31%


So how do you explain to your client across the desk looking at this thinking "WHY WOULD I INVEST MY MONEY IN A FUND THAT UNDERPERFORMS THE BENCHMARK CONSISTENTLY SINCE 1957?"


Simple - the brochure explains the meaning :


"As shown here, over its lifetime, American Mutual Fund has been less volatile than its primary benchmark, the S&P 500."


Outstanding. I want to sell my client a fund that underperforms the benchmark since inception but explain it as being "less volatile". Oh, and then there's the upfront load.


Don't get me wrong- there are some GREAT American Funds- but come on- calling an underperformer "less volatile"?

Jun 29, 2006 4:00 pm

Actually what really sells the client is the JD power and associates poster in the office along with smell of Chinese food.


Real tomato ketchup Clark

Jun 29, 2006 4:49 pm

We must be on the same AF mailing list. Got a copy of that one in the mail too. I wanted to know why Anne spent $1980 on patio furniture in 1977. Did they adjust the brochure backwards for inflation? $1980 for patio furniture in 77 has got to be alot of money.

Jun 29, 2006 4:59 pm
jonesescapee:

Actually what really sells the client is the JD power and associates poster in the office along with smell of Chinese food.


Real tomato ketchup Clark



Actually that window cling-that is VOLUNTARY-adds merit to serving the individual investor that others neglect or reject unless they are $1M or more, what a joke!

Jun 29, 2006 5:42 pm
MBAassist:
jonesescapee:

Actually what really sells the client is the JD power and associates poster in the office along with smell of Chinese food.


Real tomato ketchup Clark



Actually that window cling-that is VOLUNTARY-adds merit to serving the individual investor that others neglect or reject unless they are $1M or more, what a joke!



Nice try Incredble No "i" you are as transparent as the front door on stripmall Jones office. 

Jun 29, 2006 5:58 pm
munytalks:

...But today it's like I'm seeing this for the first time: inside the literature is a box giving the total return for the American Mutual fund versus it's benchmark the S & P 500. Results?

AMF  11.95%     S&P  14.31%


So how do you explain to your client across the desk looking at this thinking "WHY WOULD I INVEST MY MONEY IN A FUND THAT UNDERPERFORMS THE BENCHMARK CONSISTENTLY SINCE 1957?"


Simple - the brochure explains the meaning :


"As shown here, over its lifetime, American Mutual Fund has been less volatile than its primary benchmark, the S&P 500."


Outstanding. I want to sell my client a fund that underperforms the benchmark since inception but explain it as being "less volatile". Oh, and then there's the upfront load.


I'm not defending his fund...I've never sold it, but the numbers you're quoting are the standard deviation, NOT annual return.  Annual return according to the flyer in question is 12.3% vs. 11.9% for the S&P 500 for the period in question.  It's hardly a world-beater, but they do have a point about returning more with less volatility...

Jun 29, 2006 5:59 pm
MBAassist:
jonesescapee:

Actually what really sells the client is the JD power and associates poster in the office along with smell of Chinese food.


Real tomato ketchup Clark



Actually that window cling-that is VOLUNTARY-adds merit to serving the individual investor that others neglect or reject unless they are $1M or more, what a joke!


Yes, you are...get a grip...

Jun 29, 2006 7:11 pm

Indyone,


So what you are saying is that the American Mutual Fund earned a better rate of return than the S&P 500 with 16.5% less risk as measured by standard deviation?


I was under the impression that most American Fds have under performed the S&P.


P.S. Muny, my 5th grader has better reading comprehension than you.

Jun 29, 2006 10:43 pm
The Answer:

Indyone,

So what you are saying is that the American Mutual Fund earned a better rate of return than the S&P 500 with 16.5% less risk as measured by standard deviation?


I was under the impression that most American Fds have under performed the S&P.


That's what the flyer says.  There are several American Funds that clobber the S&P index.  It really hasn't been the case that they can't perform.  The biggest knocks on American Funds is that (1) they've gotten very big and there is a question as to whether they can still perform at a high level given this bloat, (2) They are not very style pure.  As JoeDaLPLBroker said recently, their growth fund was accumulating a lot of international names as holdings, and (3) They often don't show much appreciation when a broker gives them significant business...they are notoriously cheap.

Jun 30, 2006 2:54 pm
Indyone:
munytalks:

...But today it's like I'm seeing this for the first time: inside the literature is a box giving the total return for the American Mutual fund versus it's benchmark the S & P 500. Results?

AMF  11.95%     S&P  14.31%


So how do you explain to your client across the desk looking at this thinking "WHY WOULD I INVEST MY MONEY IN A FUND THAT UNDERPERFORMS THE BENCHMARK CONSISTENTLY SINCE 1957?"


Simple - the brochure explains the meaning :


"As shown here, over its lifetime, American Mutual Fund has been less volatile than its primary benchmark, the S&P 500."


Outstanding. I want to sell my client a fund that underperforms the benchmark since inception but explain it as being "less volatile". Oh, and then there's the upfront load.


I'm not defending his fund...I've never sold it, but the numbers you're quoting are the standard deviation, NOT annual return.  Annual return according to the flyer in question is 12.3% vs. 11.9% for the S&P 500 for the period in question.  It's hardly a world-beater, but they do have a point about returning more with less volatility...




What I am wondering is WHY are they spending money marketing this fund? No matter where I check it seems to be the worst of American Funds- so why all the ink?  I just rechecked the brochure and you are correct but when I also look at the piece called "What Makes AmericanFunds Different" it give the return as follows:


1 yr 4.37  5 yr. 5.65  10 yr. 11.27   so still not Great.


and I DO like many American Funds. Like why didn't they make nice marketing pieces for Capital Income Builder if they want to market a less volatile fund? I was just saying it didn't make any sense.

Jun 30, 2006 2:57 pm
The Answer:

Indyone,


So what you are saying is that the American Mutual Fund earned a better rate of return than the S&P 500 with 16.5% less risk as measured by standard deviation?


I was under the impression that most American Fds have under performed the S&P.


P.S. Muny, my 5th grader has better reading comprehension than you.




You must be very proud! Maybe I can borrow him next time I go through my mail sorting out all this crap we get.


But I still don't get why American spends so much money marketing a THIS fund....

Jun 30, 2006 3:24 pm

Muny,


They are marketing this one because it apparently isn't selling itself, and their wholesalers don't exactly do anything.  Besides this is typical of their style to promote a fund that is out of favor. 

Jun 30, 2006 3:56 pm
munytalks:
Indyone:
munytalks:

...But today it's like I'm seeing this for the first time: inside the literature is a box giving the total return for the American Mutual fund versus it's benchmark the S & P 500. Results?

AMF  11.95%     S&P  14.31%


So how do you explain to your client across the desk looking at this thinking "WHY WOULD I INVEST MY MONEY IN A FUND THAT UNDERPERFORMS THE BENCHMARK CONSISTENTLY SINCE 1957?"


Simple - the brochure explains the meaning :


"As shown here, over its lifetime, American Mutual Fund has been less volatile than its primary benchmark, the S&P 500."


Outstanding. I want to sell my client a fund that underperforms the benchmark since inception but explain it as being "less volatile". Oh, and then there's the upfront load.


I'm not defending his fund...I've never sold it, but the numbers you're quoting are the standard deviation, NOT annual return.  Annual return according to the flyer in question is 12.3% vs. 11.9% for the S&P 500 for the period in question.  It's hardly a world-beater, but they do have a point about returning more with less volatility...




What I am wondering is WHY are they spending money marketing this fund? No matter where I check it seems to be the worst of American Funds- so why all the ink?  I just rechecked the brochure and you are correct but when I also look at the piece called "What Makes AmericanFunds Different" it give the return as follows:


1 yr 4.37  5 yr. 5.65  10 yr. 11.27   so still not Great.


and I DO like many American Funds. Like why didn't they make nice marketing pieces for Capital Income Builder if they want to market a less volatile fund? I was just saying it didn't make any sense.


No doubt this isn't one of their better efforts, although it is the exact fund sold by the local "star" EDJ broker to my father back in the 80's when I told him he needed to fund an IRA.  I'll also agree that it seems to be AmFunds style to promote funds that are out of favor and not selling well by emphasizing the positives, and downplaying the fact that this has been a lackluster fund at best.  They probably aren't promoting CIB and growth fund because the inflows there are sufficient to satisfy the machine.


I find myself doing less and less American Funds because of these and other concerns, not to mention the fact that they do a lousy job of supporting the reps that are feeding them.  Much of what I used to feed AmFunds is now going to Franklin and ING VA's...there's plenty of comparable alternatives in those shops, and they've agreed to write checks for my customer appreciation events.  While I understand that AmFunds probably doesn't miss me, it just feels therapeutic to stick it to them in some small way...

Jul 3, 2006 6:49 pm

Amen Indyone!


As far as A.F. , they promote the flavor (fund) of the year. I trust all the Jones  boys will be selling this fund  as they all seem to march to the same drum.


A.F. has no secrets when it comes to support. You get it if you produce several million a year. If you don't sell a million at least, you really don't exist. Yes, they've done a good job and yes, they have been very, very impressive when it comes to their performance however, I was at Jones from '98 to '04 and I remember not being able to give away A.F.'s  in '98 & '99 because all the other houses were so hot. I believe time will bring many of the other fund families back to the norm. I would hate to put serious $$'s at A.F. now. I believe fund families that have different investment philosophies will catch A.F.'s  sacred numbers that they have posted. Time will tell.


As far as comparing numbers, I believe it's really only brokers that cause all this fuss. If you have a relationship with your clients, they will follow your advise and council always. Especially if you do it with conviction. If you believe in whatever fund family, stock, uit  or money manager that you represent, then they will too. We are the only ones that worry about the numbers! They just wanna know that you care. If they do watch the numbers then you probably really don't want them as clients. Thats just my thoughts on this

Jul 3, 2006 7:01 pm
Indyone:

I find myself doing less and less American Funds because of these and other concerns, not to mention the fact that they do a lousy job of supporting the reps that are feeding them. 


Why would you be doing, "less and less" instead of absolutely zero?

Jul 3, 2006 7:50 pm
NASD Newbie:
Indyone:

I find myself doing less and less American Funds because of these and other concerns, not to mention the fact that they do a lousy job of supporting the reps that are feeding them. 


Why would you be doing, "less and less" instead of absolutely zero?



Breakpoints?  


I thought you said to find a fund and stick with it through thick and thin 

Jul 3, 2006 8:14 pm
babbling looney:

Breakpoints?  


I thought you said to find a fund and stick with it through thick and thin 



If you're getting breakpoints in Fund A you should be able to move it to Fund B and qualify for a breakpoint there too.


I understand the tax ramifications and the fact that your client will be incurring a second sales charge--but that could be a small price to pay if there are storm clouds on the horizon.

Jul 4, 2006 10:14 am

Actually the 10, 15 and 20 year beta's on the fund are 0.59, 0.62 and 0.63 respectively. A recent American Funds "Investors" magazine has an article on active vs passive mgmt, and a hypothetiical illustration compares the American Mutual Fund with the S&P 500 from 1970 to 2000. A $100K in the index grew to $4.8M and in their fund to less than $4.4M. But if the investor started with a 5% distribution, increased annually 5% for inflation, then the ending amounts were $1.2M for their fund and $550K for the index. Through 2005 the ending amounts were $1.7 for their fund and $350K for the index. So volatility was crucially important. As they expressed, the person was eating their seed corn in difficult times.


I am very comfortable using this fund for retirees and showing this illustration. 

Jul 4, 2006 11:57 am
Butkus:

Actually the 10, 15 and 20 year beta's on the fund are 0.59, 0.62 and 0.63 respectively. A recent American Funds "Investors" magazine has an article on active vs passive mgmt, and a hypothetiical illustration compares the American Mutual Fund with the S&P 500 from 1970 to 2000. A $100K in the index grew to $4.8M and in their fund to less than $4.4M. But if the investor started with a 5% distribution, increased annually 5% for inflation, then the ending amounts were $1.2M for their fund and $550K for the index. Through 2005 the ending amounts were $1.7 for their fund and $350K for the index. So volatility was crucially important. As they expressed, the person was eating their seed corn in difficult times.


I am very comfortable using this fund for retirees and showing this illustration. 



Someone that actually understands total return is always the most important factor  I haven't seen many like you here.

Jul 4, 2006 1:58 pm
NASD Newbie:
Indyone:

I find myself doing less and less American Funds because of these and other concerns, not to mention the fact that they do a lousy job of supporting the reps that are feeding them. 


Why would you be doing, "less and less" instead of absolutely zero?


Because, like them or not, there are still areas where they compete very well.  I just find myself looking much more diligently for replacements in areas where they don't appear nearly invincible