American Funds: Exploring Smart Investment Choices

American Funds, a division of Capital Group, offers a variety of funds in several asset classes. These include asset allocation funds, fixed-income classes of funds, and funds for most investing styles and goals. The funds are actively managed by portfolio managers who pay attention to value and keep turnover rates low.

American Funds charges front-end and back-end loads with higher expense ratios. The fees are higher than those of Vanguard, which offers no-load funds.

- Growth funds

- Growth-and-income funds

- Equity-income funds

- Balanced funds

- Bond funds

- Capital-preservation funds

- Target date funds

- Portfolio series

Growth funds

The Growth Fund of America® (AGTHX) is one such example, with $291,986.1 million in fund assets as of September 30, 2024. It has shown strong returns, with a 1-year return of 40.47%, a 5-year return of 16.40%, and a 10-year return of 13.48%. The fund's investment objective is to provide growth of capital, and it does so by investing at least 65% of its assets in common stocks, as well as convertibles, preferred stocks, U.S. government securities, bonds, and cash equivalents.

Geographic flexibility is another advantage of growth funds, allowing portfolio managers to pursue opportunities outside the U.S. This flexibility enables funds like the Growth Fund of America® to navigate a variety of market environments. As of September 30, 2024, 8.3% of its assets were invested in non-U.S. equities.

Growth-and-income funds

These funds are popular among investors with moderate (but not excessive) appetites for risk—the so-called "balanced investor". Returns will typically lag those of pure growth funds, but sometimes high-yielding stocks become favoured in the stock markets, driving growth-and-income funds to superior performance. The stability of these funds appears most attractive when the broad economy looks to be weakening.

When it comes to growth and time horizons, investors in growth-and-income portfolios favour stability without sacrificing returns that outpace inflation. Depending on risk tolerance, a balanced investment objective is adopted by individuals who either shun volatility completely or scale back growth objectives as retirement approaches. As a rule of thumb, financial professionals hold that growth allocations decrease as an investor ages.

• Dodge and Cox Balanced Fund ("DODBX")
• Vanguard Growth and Income Fund Investor Shares ("VQNPX")
• American Funds Developing World Growth & Income Fund
• International Growth & Income Fund
• The Investment Company of America
• Capital World Growth and Income Fund
• Fundamental Investors
• American Mutual Fund
• Washington Mutual Investor Fund

Equity-income funds

• JPMorgan Equity Income OIEIX
• T. Rowe Price Equity Income PRFDX
• Fidelity Equity-Income FEQIX
• Vanguard Equity-Income VEIRX

Balanced funds

The American Balanced Fund® (ABALX) is an example of a balanced fund offered by American Funds. It has a diversified portfolio, investing between 50% and 75% of its assets in equities, with exposure to both growth-oriented and dividend-paying stocks. The remaining assets are typically invested in investment-grade bonds, which provide diversification from equities and can help limit volatility. The fund's investment objectives are conservation of capital, current income, and long-term growth of capital and income.

As of September 30, 2024, the fund had total assets of approximately $237-239 billion, with a net asset value of $36.47-$36.59 per share. The fund has generated returns of 25.88% for the 1-year period and 8.44% for the 10-year period, as of September 30, 2024.

The American Funds American Balanced R6 Fund (RLBGX) is another balanced fund offered by American Funds. It follows a similar investment strategy to the ABALX fund, with a focus on maintaining a well-diversified portfolio of stocks, bonds, and cash equivalents. As of October 25, 2024, the fund had total assets of approximately $237 billion, with a net asset value of $36.26 per share.

American Funds' balanced funds are suitable for investors seeking a combination of growth and income, with the potential for consistent returns and lower volatility compared to pure growth funds.

Bond funds

The Bond Fund of America® (ABNDX) is an example of a bond fund offered by American Funds. It has a high-quality core bond portfolio with broad diversification. The fund can invest in every sector of the bond market and pursue multiple sources of active return, with a limited percentage of below-investment-grade holdings. This approach may help diversify equity risk in a portfolio.

The fund primarily invests in corporate debt securities, U.S. and other government securities, mortgage-related securities, and cash. It may also invest in non-U.S. fixed-income securities, with up to 25% of assets allocated to this category.

The fund's investment objective is to provide a high level of current income, consistent with the preservation of capital. It has a moderate interest-rate sensitivity and an effective duration of 5.87 years.

As of October 15, 2024, the fund had total assets of 91.7 billion, with a distribution fee level of low and a share class type of front load. The minimum initial investment required is 250.

The fund's management team includes experienced professionals such as Pramod Atluri, David J. Betanzos, David A. Hoag, Fergus N. MacDonald, and Chitrang Purani, who joined as the fifth named portfolio manager in March 2024.

Frequently asked questions