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S&P Now negative since Bush took office (7yrs ago)

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Jan 29, 2008 5:30 pm

Let’s read the goal of the fund again:  “The investment seeks a level of current income that exceeds the average yield on U.S. stocks generally and a growing stream of income over the years; growth of capital is a secondary consideration.”

  With that being their goal, how does is make sense to compare to MSCI World?
Jan 29, 2008 5:39 pm
josephjones107:

American funds doesnt seem to have many boundries with what they are doing. This is much different than most of their competitors. It becomes very difficult to stay properly allocated with them.

At EDJ they won’t count the % of cash and % international, in these types of funds. There is alot of this going on, and it’s kind of dangerous as clients aren’t really allocated the way they think they are.

  In EDJ portfolio system CAIBX is allocated 30% income, 70% Growth and Income with 45% of the Growth and Income being international. I would have to disagree that CAIBX is kind of dangerous.
Jan 29, 2008 6:02 pm

You take us as a whole as a group of simpletons, not knowing what we are investing in.  As a group, I believe we know exactly what we are investing in.  There are some exceptions within that group that are blissfully unaware that CAIBX is not simply a balanced fund like ABALX.   

  I've never sold CAIBX as an investment that is designed to beat the S&P.  It just happens to do it pretty routinely.  I use it to give some conservative exposure to the markets, whatever they might be.  And I agree with Max that I wouldn't consider CAIBX dangerous.  1 down year out of the last 10 (and that only 2.77%) , beta of .68 and a SD of 1.72 isn't dangerous.  If it is, it's the best dangerous investment out there.    Now, VFINX, that's what I call dangerous.   
Jan 29, 2008 6:10 pm

Problem is many are comparing American Funds that are heavily invested in International stocks versus the S&P (including some on this very website).   That is just wrong

Jan 29, 2008 6:32 pm

[quote=josephjones107] [quote=anonymous] Here’s the goal of CAIBX:  “The investment seeks a level of current income that exceeds the average yield on U.S. stocks generally and a growing stream of income over the years; growth of capital is a secondary consideration.”

 
I see no reason why that means that they need to invest in US equities.   After all, it is a world allocation fund.   Why would they invest in all US equities if they feel that the best way to achieve their goal is to invest in something else?[/quote]


Then their benchmark should not be against the S&P. It should be against MSCI World (which has had much better returns than CAIBX)

5 year
MSCI World 16.12%
CAIBX       13.78%[/quote]   They have an international limitation by prospectus.  I think it's like 30 or 40%?
Jan 29, 2008 6:37 pm

[quote=anonymous]Let’s read the goal of the fund again:  “The investment seeks a level of current income that exceeds the average yield on U.S. stocks generally and a growing stream of income over the years; growth of capital is a secondary consideration.”

  With that being their goal, how does is make sense to compare to MSCI World?[/quote]   Fortunately or unfortunately, AMF doesn't give rat's a$$ what benchmark they are compared to.  They don't manage to benchmarks, they manage to objectives.  Yes, it is sometimes difficult to analyze them in a world of "style boxes" and "indexes".  But pop it into to Morningstar, and it dissects the whole thing for you, cash, bonds, int'l, etc.  You can't neatly compare them to any benchmark (unless you use blended benchmarks).   But, more return with less risk is really all I am looking for, so, there ya' go - CAIBX!
Jan 29, 2008 6:47 pm
But, more return with less risk is really all I am looking for, so, there ya’ go - CAIBX![/quote]





This is the case when International markets outperform US. It will be reversed when US outperforms Intl over a long enough period of time
Jan 29, 2008 7:25 pm

“This is the case when International markets outperform US. It will be reversed when US outperforms Intl over a long enough period of time”

  and when this happens CAIBX should continue to be  looked upon by how it succeeds in it's goal, ""The investment seeks a level of current income that exceeds the average yield on U.S. stocks generally and a growing stream of income over the years; growth of capital is a secondary consideration."  as opposed to how it performs against some benchmark.    
Jan 29, 2008 7:44 pm

I like American Funds alot. I just think their are too many reps that think they are superior stock pickers. They are not. Their outperformance is a result of International exposure.

Jan 29, 2008 8:22 pm

The funny thing is that it just doesn’t matter WHY they outperform.  What matters to clients is that they DO. 

  You are correct that they are not superior stock pickers.  Saul Pannell is a superior stock picker.  What makes American Funds superior is their discipline.  Like B24 said before, they just don't care what everyone else thinks about them.  They do what they do, and have always done, and it works.  It's the same thing individual investors should be doing, but aren't.    I also don't think their performance can be linked only to their international exposure right now.  Do enough research on them and you'll find out that they outperform in most markets.  The only exception might be out of control growth markets (see 1998-1999) where they fall behind.  But, they stick to their processes and disciplines and don't get get sucked in to the latest fads.  It has normally paid off for them.    Think what you want, sell what you want, but don't be suprised when the local Jones guy takes accounts from you using those non index following, over-internationally exposed American Funds.
Jan 29, 2008 9:18 pm

"The funny thing is that it just doesn’t matter WHY they outperform. What matters to clients is that they DO."



This is almost exactly what my mentor at EDJ told me in 1999 about Putnam Growth Opportunities fund. It’s funny how Jones reps are always chasing performance.

Jan 30, 2008 6:31 pm

Funny, but I just read your post on the $850K topic where you spelled out for someone the funds/indexes he should be using for that client.  No questions about goals, plans, etc.  Just buy these funds.  Now who’s chasing performance? 

  No question Growth Opps was a horrible fund.  But if you listened at all to what Jones had to say, you wouldn't have put more than maybe 5% of the client's portfolio into that fund or one like it.  Just like the portfolio you mentioned in the other post, diversification is the most important part of the portfolio.