There are plenty of choices in the Large Cap Growth category, but where should you start your research? Well, one fund that might be worth investigating is American Funds Growth Fund of America A (AGTHX). AGTHX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.
AGTHX is classified in the Large Cap Growth segment by Zacks, an area full of possibilities. Companies are usually considered to be large-cap if their stock market valuation is more than $10 billion. Large Cap Growth mutual funds invest in many large U.S. firms that are projected to grow at a faster rate than their large-cap peers.
American Funds is based in Los Angeles, CA, and is the manager of AGTHX. American Funds Growth Fund of America A made its debut in December of 1973, and since then, AGTHX has accumulated about $167.14 billion in assets, per the most up-to-date date available. A team of investment professionals is the fund’s current manager.
Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 11.94%, and is in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 24.63%, which places it in the middle third during this time-frame.
It is important to note that the product’s returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund’s [%] sale charge. If sales charges were included, total returns would have been lower.
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. The standard deviation of AGTHX over the past three years is 13.98% compared to the category average of 10.83%. The standard deviation of the fund over the past 5 years is 17.46% compared to the category average of 12.88%. This makes the fund more volatile than its peers over the past half-decade.
Investors should not forget about beta, an important way to measure a mutual fund’s risk compared to the market as a whole. AGTHX has a 5-year beta of 1.1, which means it is likely to be more volatile than the market average. 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. With a negative alpha of -3.5, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, AGTHX is a load fund. It has an expense ratio of 0.60% compared to the category average of 0.93%. So, AGTHX is actually cheaper than its peers from a cost perspective.
Investors should also note that the minimum initial investment for the product is $250 and that each subsequent investment needs to be at $50.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Overall, American Funds Growth Fund of America A ( AGTHX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, American Funds Growth Fund of America A ( AGTHX ) looks like a good potential choice for investors right now.
This could just be the start of your research on AGTHX in the Large Cap Growth category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well 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.
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This article originally published on Zacks Investment Research (zacks.com).