American Funds

[dm]

In my 401k I currently have American Funds. I have the following:

Investment Company of America 40%
New Perspective 30%
New Economy 15%
Small Cap World 15%

Im getting ready to retire so I can transfer these over to a IRA if I wish. Or I can sell them in the 401k and transfer the cash to an IRA and buy what I want. I shouldn't need to start withdrawing the funds for probably 10 more years, but you never know.

I see most here like the Vangard Funds, I am also considering just buying some ETF's and do the slice and dice as needed. I didn't put much though into the choices obove as we didn't have many choices when I started.

My after tax holdings are currently about 60% individual stocks and 40% cash. My wife is going to work one more year and then she will have a cola pension that should cover most of our expenses.

So what are the opinion's here on the American Funds?

 

[FinanceDude]

In my 401k I currently have American Funds. I have the following:

Investment Company of America 40%
New Perspective 30%
New Economy 15%
Small Cap World 15%

Im getting ready to retire so I can transfer these over to a IRA if I wish. Or I can sell them in the 401k and transfer the cash to an IRA and buy what I want. I shouldn't need to start withdrawing the funds for probably 10 more years, but you never know.

I see most here like the Vangard Funds, I am also considering just buying some ETF's and do the slice and dice as needed. I didn't put much though into the choices obove as we didn't have many choices when I started.

My after tax holdings are currently about 60% individual stocks and 40% cash. My wife is going to work one more year and then she will have a cola pension that should cover most of our expenses.

So what are the opinion's here on the American Funds?

You probably won't get much feedback on here, as this is the home of many "Bogleheads" and the like, but I have owned American for over 10 years and have been very happy with them.

They have low expenses, and pretty steady performance. What class of shares do you own in the 401K? If they are A class, they have very low expenses, usually under .70 a year.

The only concern I have is their growth. They had about $300 billion in assets in 2001, and just last month hit $1 TRILLION in assets.........

 

[yakers]

I had a couple AFs and they were good to me but I did transfer them into my 401k type (TSP) account. Still have one for my son's education Roth.If you have paid the load or they are no load then you may want to hold them, looks like a nice AA already. I do like Vanguard and if you were starting from scratch I think they are the way to go but AF is not bad, even Bogle had said he likes the way they manage & invest (but not the load).

 

[Telly]

About the only load fund family that Scott Burns talks about in a positive light is American Funds. He's done that many times.

The only concern I have is their growth. They had about $300 billion in assets in 2001, and just last month hit $1 TRILLION in assets.........

Morningstar has often mentioned this in the last year or so, that it "could" be a concern for the future, dampening returns. That in effect, A/F managers would be running out of rocks to put money under, due to the high inflows of success. However, I wonder about that a bit, in regards to other non-A/F funds with the same investment style. If A/F starts running out of suitable rocks to put money under, won't other funds following the same style run out too? In other words, it becomes a industry-wide problem, not a problem specific to one fund or fund company?

At this point, I have no plans to change my A/F holdings to somebody else.

 

[Dry Socks]

However, I wonder about that a bit, in regards to other non-A/F funds with the same investment style. If A/F starts running out of suitable rocks to put money under, won't other funds following the same style run out too? In other words, it becomes a industry-wide problem, not a problem specific to one fund or fund company?

Isn't this the idea of an efficient market ? All those guys (and gals) with Billions (Trillions) to invest looking for the best deal. If that's the case, then the funds with the lowest expense rate (may) win.

 

[Alex]

The American funds offered in most 401k plans do not have a sales load. They average around .75 in the expense ratio area, so they are lower than the industry average, but certainly not lower than 90% of Vanguards offerings. I've owned a few of their funds in my own 401k plan for over a decade and they have been good performers. If you are happy with them you should stick with them. Personally, I prefer Vanguards index funds over any actively managed funds, as yes, I am a Boglehead. For me, as soon as I retire or change companies, I will roll the 401k into a self directed IRA with Vanguard. Best of luck!

 

[clifp]

By all accounts American Funds is one of the top managed fund families out there. If you avoided paying a load charge, which is likely in a 401K. I think you did ok. Not only did Scott Burns have a good thing to say but IIRC both Jermey Speigel and Berstein had positive things to say about the family.

All that being said according to Morningstar almost all of there fund have experience a huge increase (e.g. triple) in assets, so M* expectation is going forward American funds returns will be roughly in line with the market indexs. Their expenses are low for a managed fund but a good .5% higher than Vanguard ETF or index fund.

If you are under 59 1/2, I wouldn't be in a rush to roll the funds over into an IRA because a 401K has certain advantages, if you are over 59 1/2, then moving them into an IRA certainly makes sense. If you do roll them over into a IRA at Vanguard, stick with funds there and don't go wild picking individual stocks. (Yes, I know I've argued differently in other threads..)

 

[Arc]

You won't be sorry if you hold on to American Funds.

 

[ats5g]

Well, I don't like most classes of the American Funds because most of them charge useless 12b-1 fees. Also, I don't like the tactics that American Funds Distributors used/uses to get brokers to sell their funds. Let's see, which funds is a broker going to sell? Obviously those that pay the broker the biggest kickbacks cut of the commissions and 12b-1 fees.

Plus, some of the American Funds are just closet index funds... like Investment Company of America - a closet value index fund.

Each to his own, but unless someone is going to agree to pay me if AF's don't beat their benchmark, I'm sticking with index funds.

- Alec

 

[Darryl]

I own a couple different American Funds and they have done very well for me. I wouldn't be in a hurry to drop them.

 

[FinanceDude]

Well, I don't like most classes of the American Funds because most of them charge useless 12b-1 fees. Also, I don't like the tactics that American Funds Distributors used/uses to get brokers to sell their funds. Let's see, which funds is a broker going to sell? Obviously those that pay the broker the biggest kickbacks cut of the commissions and 12b-1 fees.

If you're going to rip on American, kindly get your facts straight..........

Plus, some of the American Funds are just closet index funds... like Investment Company of America - a closet value index fund.

Um...........proof??

 

[renferme]

Does anyone here pay the 5.75% load when buying American Funds ?
If so , WHY ?
.

 

[FinanceDude]

Does anyone here pay the 5.75% load when buying American Funds ?
If so , WHY ?
.

5.75% $0-$24,999
5.00% $25,000-$49,999
4.50% $50,000-$99,999
3.50% $100,000-$249,999
2.50% $250,000-$499,999
2.00% $500,000-$999,999
0.00% $1,000,000 and up............

Just FYI...............

 

[renferme]

5.75% $0-$24,999
5.00% $25,000-$49,999
4.50% $50,000-$99,999
3.50% $100,000-$249,999
2.50% $250,000-$499,999
2.00% $500,000-$999,999
0.00% $1,000,000 and up............

Just FYI...............

Thanks,
I don't have one million to put into American Funds. Assuming a 40% equity
and 60% non-equity, I would need a portfolio of 2.5 million in order to put 1 mi.
into American stock funds. I doubt if many people have that kind of money.
Recommendation: if you can't afford 1 mil. , don't go near American Funds.
It's a rip.

 

[NinjaPigeon]

Does anyone here pay the 5.75% load when buying American Funds ?
If so , WHY ?
.

As clifp mentioned, if you buy these inside a 401k, the load is probably waived. But outside of that, I agree that it's something I'd avoid. However, I have two friends who have purchased funds with a 5.75% load in the last year. I say it's crazy, but to each their own.

BTW, anyone know why it always seems to be 5.75? Why not 5.35 or even 6.15?

 

[73ss454]

Ninja, I think that if your friends knew there were 5.75% fees to get into the funds then your right. Until I started reading the forum 2 or 3 years ago I had no clue about these fees. I wish I had the money back that I spent on fees for my broker over the years. What's the old saying, buyer beware!

 

[NinjaPigeon]

Oh, they very much know. One of the guys only has like 3k he's investing too - it's his entire savings. And he's taking a 5.75% hit out of the gates. But people don't like being told they're making a poor choice, so I'm keeping my mouth shut. Instead, I'm focusing on the positive - he's getting involved in finances.

 

[FinanceDude]

As clifp mentioned, if you buy these inside a 401k, the load is probably waived. But outside of that, I agree that it's something I'd avoid. However, I have two friends who have purchased funds with a 5.75% load in the last year. I say it's crazy, but to each their own.

BTW, anyone know why it always seems to be 5.75? Why not 5.35 or even 6.15?

Up until the mid 70's, it was 8 PERCENT............

 

[dm]

I bought these in my 401k and there was no charge. I'm not sure what advantage I would have leaving them in my current 401k except it would be easier. If I transfer to my brokerage account I could invest in whatever I wished, of coarse this may be a bad thing.

There is no hurry and since I'm going to be working part time for a few months it gives me the chance to max the 401k out before I retire.

 

[choices1945]

I am taking early retirement in a couple of weeks so I have to make a rollover decision soon. I've had my 401K in Fidelity for 20 years and I think their record is below average at best. I had no other choice in my 401K. I was solicited by a Planner for American Funds and I was skeptical. I did some research and their returns are much better than either Fidelity or Vanguard. I talked to a CPA last night and his opinion was that the $8000 load I would have to pay is "nothing". There is a reason that American Funds are rated highly by Money and Fortune.

 

[FinanceDude]

I am taking early retirement in a couple of weeks so I have to make a rollover decision soon. I've had my 401K in Fidelity for 20 years and I think their record is below average at best. I had no other choice in my 401K. I was solicited by a Planner for American Funds and I was skeptical. I did some research and their returns are much better than either Fidelity or Vanguard. I talked to a CPA last night and his opinion was that the $8000 load I would have to pay is "nothing". There is a reason that American Funds are rated highly by Money and Fortune.

I have owned AF for over 10 years, and have NO regrets about their performance in good and BAD markets. My WORST quarterly return in my portfolio of AF was -8%. I can think of a TON of people who would have traded places with me.

AF took a lot of heat when a bunch of their funds was 10-20% in cash during the last bear market, but it sure helped curb volatility.

Bond Fund of America has been around since 1975, and it's lifetime average return is almost 9% a year ...............