Opinion on American Funds

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Star Advisor's picture
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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?

nestegg's picture
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Joined: 2007-06-14

Where have you been hiding the last 100 years lol

theironhorse's picture
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Joined: 2007-03-03

r u serious?

troll's picture
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Joined: 2004-11-29

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

 
It's funny what a simple SEARCH will find for you.

nestegg's picture
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Joined: 2007-06-14

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???

Dark Knight's picture
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Joined: 2008-01-30

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.

Broker24's picture
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Joined: 2006-10-12

Dark Knight wrote:
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.

Broker24's picture
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Star Advisor wrote: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.

Lakers's picture
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Joined: 2005-02-05

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.
 

MISS JONES's picture
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Joined: 2007-08-28

Lakers wrote: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.

Broker7's picture
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Joined: 2007-02-23

I think the smiley winking face denotes sarcasm.

theironhorse's picture
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Joined: 2007-03-03

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.

Spaceman Spiff's picture
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Joined: 2006-08-08

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.

Broker24's picture
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Joined: 2006-10-12

Spaceman Spiff wrote: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

Indyone's picture
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Joined: 2005-05-31

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.

EDJ4now's picture
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Joined: 2006-02-08

American what?  They sell mutual funds now?

Broker24's picture
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Joined: 2006-10-12

Indyone wrote: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.

anabuhabkuss's picture
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Joined: 2005-05-02

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.

Ashland's picture
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Joined: 2007-03-07

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.

Broker24's picture
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Joined: 2006-10-12

anabuhabkuss wrote: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.

EDJ4now's picture
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Joined: 2006-02-08

I haven't looked at it for a while, but they used to have an overlap chart.  It wasn't as bad as you would think, CAIBX in particular doesn't really overlap much with anything, as I recall. 
 
By the way, I just landed a $400,000 rollover from an EDJ client.  The EDJ advisor is an American Funds true beliver, and told his client that she should put this rollover with her existing $400,000 in American Funds.  That saves them about $2,000 on breakpoints over diversifying with a different fund family.  It also puts about 80-90% of their total net worth (100% outside of their house and a small business) with one fund company. 
 
When I told her that I could still reach the breakpoint, but that it would only cost her about $2,000 to diversify with another company, she couldn't understand why he wouldn't have presented that option.  I may eventually get the existing American Funds, but I did sign the paperwork for the new money. 
 
The best part?  We called the 401k provider and changed the check, which was to go to EDJ, to go to my firm.  He still doesn't know he lost the account.  I probably shouldn't enjoy that part as much as I do, but I must admit that taking funds from EDJ warms my heart more than a regular transfer. 

henryhill's picture
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Joined: 2007-08-23

caibx has 45% overlap with cwgix and 35% with income fund of america.  Those are the two highest overlaps last I checked.

Ashland's picture
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EDJ4now wrote: I haven't looked at it for a while, but they used to have an overlap chart.  It wasn't as bad as you would think, CAIBX in particular doesn't really overlap much with anything, as I recall. 
 
By the way, I just landed a $400,000 rollover from an EDJ client.  The EDJ advisor is an American Funds true beliver, and told his client that she should put this rollover with her existing $400,000 in American Funds.  That saves them about $2,000 on breakpoints over diversifying with a different fund family.  It also puts about 80-90% of their total net worth (100% outside of their house and a small business) with one fund company. 
 
When I told her that I could still reach the breakpoint, but that it would only cost her about $2,000 to diversify with another company, she couldn't understand why he wouldn't have presented that option.  I may eventually get the existing American Funds, but I did sign the paperwork for the new money. 
 
The best part?  We called the 401k provider and changed the check, which was to go to EDJ, to go to my firm.  He still doesn't know he lost the account.  I probably shouldn't enjoy that part as much as I do, but I must admit that taking funds from EDJ warms my heart more than a regular transfer. 

Nice kill, EDJ4now

EDJ4now's picture
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Joined: 2006-02-08

HenryHill - I guess I just showed why you shouldn't answer from memory questions about a chart you haven't seen in 3 years.  I think there was something I was pairing it with a few years ago with low overlap, but I could be wrong about that.  I don't use American all that much anymore.
 
Ashland - Thanks.

anabuhabkuss's picture
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Joined: 2005-05-02

Thanks for the response everyone. I need to do a lot more research (I guess I should sign up for a membership on morningstar?)

Jonesness's picture
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Joined: 2008-02-26

Through my limited investment training with edward jones, it really suprised me at how much we are bombarded with American funds...They are safe, but way oversized, they do not work well for many of my investors.  For many, American funds are too broad ranged and unable to hit the "style boxes".   Possibly some very good buy and hold investments for the medium and smaller clients,  but if anyone is hitting NAV with these funds, more thought should be injected by the advisor.

Cerberus's picture
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Joined: 2005-09-07

I nominate Jonesness for president of the national stupid club.  Come on JW, hire some people that don't have puss for brains.  

Jonesness's picture
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Joined: 2008-02-26

Instead of making such an offhanded comment, please elaborate on what you disagree with.. Thank you

Cerberus's picture
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Joined: 2005-09-07

Offhand?  Nope. Put down a partner of mine, expect a response.  New Jones, your clients don't care about style boxes.  They care about educating their kids, retiring with some dignity, perhaps giving some money to their church or charity and leaving some money for the heirs.  With the next stage/NAV, clients care about low expenses, a consistent system, low turnover & not being embarrassed.  Started at Jones a long time ago with Weddle as my training partner.  Wish I had never sold a  share of Putnam, Colonial, Van Kamp or any of the other EDJ pref'd funds.  AF's has been a great partner for the last 3 decades for myself and more importantly for my clients.  Do yourself a favor, toss out the Morningstar boxes and listen to your clients.   You're going to encounter a lot worse things in your career than an AF's  ICA brochure.

Jonesness's picture
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Joined: 2008-02-26

Yes, very offhanded, and very offending.  I'm thinking you are a total idiot..but I'm not calling you one. Why don't you refrain from posting anything you would not say to a persons face. You dont know me..you don't know my clients,  EJ and American does not fit my advisory methodology..they offer no asset allocation. My opinion of american funds is my opinion,  I'm not fond of them, but you can love them all you want.  Your opinion..what is wrong with VK? Why do you think American funds is so great? Also, you are delusional to believe you are a partner with American funds..you are just another broker.

Cerberus's picture
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Joined: 2005-09-07

It would be my delight to call you an idiot, especially in front of some other newbies, or even better,  in front of your family, although in light of this and your previous posts, they already know that.  Maybe it would shake you out of your current state of funk so you could have a successful career relating to people.   You've stated your opinion on this board and I'm calling you on it.   Don't want a response...don't post.   And if you think I'm offensive, god help you in this business.  You have no chance."advisory methodology" ??  I bet you have prospects throwing money at you with that one, better TM it. Is this a new Jones thing to be so touchy when someone mentions "partner"?? Webster-"partner" - def. "someone who shares with or associates with another in some action or endeavor"  

Jonesness's picture
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Joined: 2008-02-26

Cerberus,
You are over compansating for your lack of brains and balls...I know you are pissed off that I do not favor american funds..I seriously do not think you would call me an idiot, in front of my family, If I merely stated that I do not like American funds in person..The internet makes the little broker brave with his anonymity.... What do you think would happen if you did? I have no chance?? How long do you think I've been in this business?  Yes I have a methodology...obviously...you don't.... just buy american funds and keep your fingers crossed.  You are a SAD OLD MAN.

troll's picture
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Joined: 2004-11-29

And you obviously have nothing else better to do than to protect yourself on an anonymous forum.
 
You've been a member here for 3 days, and you already have 53 posts.
 
What do you think that says to us about how you spend your time?

Jonesness's picture
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Joined: 2008-02-26

Yes...I'm not working much..just planning my move out.  I get alot of good info from some very helpful anonymous forum members that have been in similar situations.  Actually, I've spoken to  2 real people via phone from this forum....so I am not anonymous.  Sorry if I come across as brash on these posts, I've said it before..I don't take crap and I call it like I see it.  Don't worry skippy and anyone else concerned, I'll be gone for good soon after I make my move. 

MISS JONES's picture
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Joined: 2007-08-28

Cerberus wrote:It would be my delight to call you an idiot, especially in front of some other newbies, or even better,  in front of your family, although in light of this and your previous posts, they already know that.  Maybe it would shake you out of your current state of funk so you could have a successful career relating to people.   You've stated your opinion on this board and I'm calling you on it.   Don't want a response...don't post.   And if you think I'm offensive, god help you in this business.  You have no chance."advisory methodology" ??  I bet you have prospects throwing money at you with that one, better TM it. Is this a new Jones thing to be so touchy when someone mentions "partner"?? Webster-"partner" - def. "someone who shares with or associates with another in some action or endeavor"  
 
FYI- Jonessess deal is he was a broker that transfered to EDJ a bit ago.. (from what i can gather) and didn't do his homeowrk and now is unhappy with the firm or more along the lines of the way we do business. So he is planning to move. He took over an office and also brought some assets. I hate to say it but this is exactly why I hate transfer brokers that come to Jones. (I should clarify.. Producing transfer brokers) Our way of doing business doesn't line up with the way most firms (other than Indy) do business and so often they are unhappy here and transfer out again.
 
Miss J

anabuhabkuss's picture
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Joined: 2005-05-02

Cerberus wrote:Offhand?  Nope. Put down a partner of mine, expect a response.  New Jones, your clients don't care about style boxes.  They care about educating their kids, retiring with some dignity, perhaps giving some money to their church or charity and leaving some money for the heirs.  With the next stage/NAV, clients care about low expenses, a consistent system, low turnover & not being embarrassed.  Started at Jones a long time ago with Weddle as my training partner.  Wish I had never sold a  share of Putnam, Colonial, Van Kamp or any of the other EDJ pref'd funds.  AF's has been a great partner for the last 3 decades for myself and more importantly for my clients.  Do yourself a favor, toss out the Morningstar boxes and listen to your clients.   You're going to encounter a lot worse things in your career than an AF's  ICA brochure.
 
Good for you. Not every FA have clients that are as naive. We are jealous however.

Broker24's picture
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Joined: 2006-10-12

Man, you guys all got up on the wrong side of the bed today.  Can't we just accept that different advisors do business different ways?  We all know there are 1000 different ways to get to the same answer in investing.  Some people like to build custom portfolios and actively trade for profits (ie. Jonesness), others like the buy-and-hold, let the fund manager do it philosophy (me, Cerberus, Ms. Jones).  Some people use SMA's, others use ETF's or Index funds.  If we all get decent returns and don't blow our clients up, who cares?

fastcar's picture
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Joined: 2007-02-21

I too wish my clients  are as naive as you Cerberus...you demon of the pits you..
 
**But they're not..hence American funds is a small part of my business
I don't know if anyone else caught it..but he trained with Weddle..that is VERY impressive.
 
BTW, you snip and snap just like your screename.

Jonesness's picture
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Joined: 2008-02-26

...cerebrus..a greek mythological demon!! SSWWWEEEEETT!  I like it!
 
I took most of the day off golfing with an employment attorney.  I will prob retain him regardless of wirehouse or indy. Icecold, so many people have been very helpful on this forum..it has actually been a pleasant surprise, I think I will stick around while I go through transition.  

anabuhabkuss's picture
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Joined: 2005-05-02

Check this out:
 
http://money.cnn.com/2008/03/18/pf/funds/Ask_the_mole.moneymag/index.htm?section=money_pf
 
I don't know who I hate more: people who turn to journalists for answers or journalists who give "advice" not knowing a person's full picture.

Broker24's picture
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anabuhabkuss wrote:Check this out:
 
http://money.cnn.com/2008/03/18/pf/funds/Ask_the_mole.moneymag/index.htm?section=money_pf
 
I don't know who I hate more: people who turn to journalists for answers or journalists who give "advice" not knowing a person's full picture.
 
And so the guy recommends C Shares.  That makes sense.  He thinks A shares cost too much, so buy C shares.  While I use C shares in many cases, his advice is flawed.  Some people are just firmly entrenched in the "only buy cheap index funds" camp.  Well, go buy VFINX and hope for he best.  I wonder what the no-load DIY'ers are all doing right now with their investments.  Hmmmmm......

fisher23's picture
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Joined: 2008-03-03

Is there any case in which an EJ advisor would recommend a no load fund?  Do they even have the ability to make that recommendation or are they stuck selling one of the preferred fund families?

Broker24's picture
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Joined: 2006-10-12

We would not sell no-loads, but we can sell virtually all fund families that other broker/dealers sell. So no, we are not stuck with the Preferred Funds. I use non-preferred funds routinely (though the core of my holdings are generally American and Franklin Templeton, both of which are preferred).

Keep in mind, a broker/dealer is only going to sell products (generally) that generate a commission or are under some type of fee. So a B/D would only sell no-loads in a fee-based account. I am told that the EDJ advisory account will allow no-loads as part of their offerings. Basically, we don't work for free.

troll's picture
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Joined: 2004-11-29

If you go to Morningstar, they list INVESTMENT (dollar weighted) returns and you can also access INVESTOR (time weighted) returns.  Take a look, it is a real eye opener.  Reminds me of the story of Magellan,  Peter Finch was god on Wall Street yet half of investors in the fund lost money.

Broker24's picture
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Bluetang wrote:If you go to Morningstar, they list INVESTMENT (dollar weighted) returns and you can also access INVESTOR (time weighted) returns.  Take a look, it is a real eye opener.  Reminds me of the story of Magellan,  Peter Finch was god on Wall Street yet half of investors in the fund lost money.
 
I tell that story (about Peter Lynch) all the time during seminars and classes I teach.  When you map it out on a whiteboard, people actually get it.  I get a lot of "man, that's so true!"

troll's picture
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Joined: 2004-11-29

Peter Finch????  WTF????  Too much beer.  Sorry.

Dark Knight's picture
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Joined: 2008-01-30

Yeah, but in that article he was up against a FULL load no breakpoints.  Remember 10yrs of C = conversion to A with American.  Very little long term expense difference in that situation and much better flexibility. 
 
I would recommed C shares to anyone thinking of American at Full load. 

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