I see a lot of people outside of EDJ bashing American Funds, and I was just curious as to why that is. Some of their numbers are pretty convincing...
I hate the multiple portfolio counselor approach. I've constantly asked the question about overlap and never received a satisfactory answer.
Also, not a big fan of funds.
They charge us $80 per trade. Therefore zero American Funds in our portfolios. Their loss.
Are you placing your business directly with American funds or are you place trades thru your BD?
If you are placing your trades thru your BD, I bet it is the BD that is charging you the $80.00.
I place small account or those who are dollar cost averaging with <?: prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />America funds, and have American Funds custodian the funds. I am paid, my BD is paid, and I do not have to pay any ticket charges. I have done the same thing with several other fund families.
Most of our business is fee-based, so it wouldn't be possible to set up the custodial account through another fund family. Ticket charges for ETF's, stocks and funds are $15 a pop, but for Franklin and American funds they ding us for $80 per, so we just use the options that don't bankrupt us. If clients insist on American funds (There are actually A LOT of people that are loyal to American funds when compared to other fund families. Its quite interesting.) then we'll just put them in a non-fee account. The upfront A share charge about cancels out the ticket charges so its a wash.
American Funds are basically allocation funds. So there really isn't a need to buy more than one. If you compare top 10 holdings majority are the same in every fund. I haven't looked lately but almost every fund had Roche, Schlumberger, Suncor Energy, Microsoft and Banco Santander in it.
A lot of their returns are based on their heavily weighted international portfolio(which we all know int'l did well because of the falling dollar more so then the actual returns) but that burned them last year when int'l got killed.
I also think the multiple portfolio manager thing in overkill. They are limited by prospectus anyway, so there are only so many companies that fit into what they are looking for.
"Hate" is an interesting word. I think it's mostly a jealousy thing. If a FA believes he is an "investment manager", he won't like turning control over to a good money manager, and therefor might look for ways to denigrate that manager. (Who likes competition?) If the FA looks at himself as an "asset gatherer", then a good money manager is not a conflict for him, but a compliment. Different strokes.
I would argue that American is VERY good at what they are good at. I do not like building an entire portfolio with American Funds, but they are very good at value investing, investing for equity income, and global value investing. They are average at fixed income, and below average at most everything else.
They have some very good value funds - Fundamental Investors, ICA. And their equity/Income funds (CIB and Income Fund) are very good (they do a good job of meeting their objectives). Capital World Growth and Income is very good in the international/global value space. Nice yields as well.
You just can't use any of them in the same portfolio. Some of the overlaps approach 50% (some of their other offerings exceed 50% overlap).
I also like New World for emerging markets. It's an EM fund with a bit less risk-taking than many of the offerings out there. There is virtually no overlap with this fund and any others, other than EuroPacific Growth.
I agree with you B24, spot on. I just thought the idea of "hating" a mutual fund company was , er, interesting.
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