American Funds--Your Opinion (IRA, mutual fund, 401k, commissions)

[murph1982]

Hello,
I just started a mutual fund with American Funds. It the Growth Fund of America American Funds. I am currently contributing $250.00 a month to the mutual fund. I would welcome your opinion if you feel I should contribute more than the $250.00. I currently contribute 20% of my pay to a 401k. I plan on retiring in 12 years. Thank You for the suggestions.

[Rakin]

I've been with AF since 2002 and very happy with the results. My adviser moved me there after the dot com bust because they had stayed solid with little loss.

I'm diversified with about 9 of their funds and they are all doing very well. I've opened up a Vanguard account and been contributing to it the last 3 years. I may someday move half my AF to Vanguard but right now it's doing well.

I have about 20% of my money in that particular growth fund.

[mysticaltyger]

Originally Posted by murph1982

Hello,
I just started a mutual fund with American Funds. It the Growth Fund of America American Funds. I am currently contributing $250.00 a month to the mutual fund. I would welcome your opinion if you feel I should contribute more than the $250.00. I currently contribute 20% of my pay to a 401k. I plan on retiring in 12 years. Thank You for the suggestions.

What is the share class? American Funds has an alphabet soup of share classes. Some have rip off expense ratios while others are quite reasonable.

Assuming you're not in a rip off share class, it's a good fund. But know what you're getting. It's a growth fund and can be quite volatile. Pros and Cons:

Pros:

--Below average expense ratio? (probably, depending on share class)
--Solid long term performance
--Below average turnover, so fairly tax efficient if in a taxable account.
--Less risky than most growth funds.

Cons:

--Expense ratio (if in a rip off share class and/or you have to pay a sales load).
--It's a growth fund, so it's volatile.
--It's a very large fund with nearly $200 Billion in assets. It's so big, there are certain stocks it just won't be able to buy because of its size.

In short, assuming there's no sales load and it has a reasonable ER, it's a decent fund, but wouldn't be my first choice. I'd prefer Mairs & Power Growth if I were choosing a growth fund. However, your fund has outperformed it over the trailing 15 year period, but not the most recent 10 year. Mairs & Power Growth tends to be less volatile, less upside in good years, but less downside in bad years.

[mysticaltyger]

As to whether you should contribute more, we'd have to know more about your financial situation.

[tommy64]

A former employer used American Funds for our retirement. I thought the 5% sales charge was way too high. I only participated because of the employer match.

AF is a very large institution, my guess is that it's a favorite for Financial Planners to use because of the high commissions. In the scenario I described above, AF was the ONLY choice we had.

If I had it to do over I'd forego the whole thing and do my own Roth IRA with a no-load index fund.

[murph1982]

Thank You very much for the information. I greatly appreciate it. Very interesting information about this fund.

[mathjak107]

i would never want to pay sales loads , but i certainly do not mind paying for better performance from my managed funds as opposed to just indexing . i am about 90% managed and 10% index .

[nmnita]

Originally Posted by Rakin

I've been with AF since 2002 and very happy with the results. My adviser moved me there after the dot com bust because they had stayed solid with little loss.

I'm diversified with about 9 of their funds and they are all doing very well. I've opened up a Vanguard account and been contributing to it the last 3 years. I may someday move half my AF to Vanguard but right now it's doing well.

I have about 20% of my money in that particular growth fund.

same here, I think we have had AF for about 25 years.

[Lizap]

Considering how large their funds are, the returns have been quite good. With that said, with some research, you can find better funds..