Is American Funds Fundamental Investors A (ANCFX) a Strong Mutual Fund Pick Right Now?

This post was originally published on this site

If you have been looking for Large Cap Blend funds, it would not be wise to start your search with American Funds Fundamental Investors A (ANCFX). ANCFX has a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Load Error

Objective

We note that ANCFX is a Large Cap Blend option, an area loaded with different options. More often than not, Large Cap Blend mutual funds invest in companies with a market cap of over $10 billion. Buying stakes in bigger companies offer these funds more stability, and are well-suited for investors with a ” buy and hold ” mindset. Additionally, blended funds mix large, more established firms into their portfolios, giving investors exposure to value and growth opportunities.

History of Fund/Manager

ANCFX finds itself in the American Funds family, based out of Los Angeles, CA. The American Funds Fundamental Investors A made its debut in July of 1978 and ANCFX has managed to accumulate roughly $51.38 billion in assets, as of the most recently available information. A team of investment professionals is the fund’s current manager.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 11.32%, and it sits in the middle third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 6.8%, which places it in the bottom third during this time-frame.

When looking at a fund’s performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. ANCFX’s standard deviation over the past three years is 17.41% compared to the category average of 14.23%. The fund’s standard deviation over the past 5 years is 14.77% compared to the category average of 12.41%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 0.97, which means it is hypothetically as volatile as the market at large. Because alpha represents a portfolio’s performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. The fund has produced a negative alpha over the past 5 years of -2.08, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, ANCFX is a load fund. It has an expense ratio of 0.62% compared to the category average of 0.97%. ANCFX is actually cheaper than its peers when you consider factors like cost.

Investors need to be aware that with this product, the minimum initial investment is $250; each subsequent investment needs to be at least $50.

Bottom Line

Overall, American Funds Fundamental Investors A ( ANCFX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, American Funds Fundamental Investors A ( ANCFX ) looks like a somewhat weak choice for investors right now.

For additional information on the Large Cap Blend area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into ANCFX too for additional information. Zacks provides a full suite of tools to help you analyze your portfolio – both funds and stocks – in the most efficient way possible.

Continue Reading