American Mutual Funds?

Is the Growth fund a good investment or can someone recommend a better option for a Roth IRA investment. Does this funds return make up for the front end load charged compared to its piers?

Hi Jason,

The American Funds in general are a good group of mutual funds for a load group. One of the most attractive features of the American Funds is their rather low expense ratios. With that said, however, loads take away quite a bit from performance.

One of the reasons he or she would buy a load mutual fund fund is because they do not have the time to do the mutual fund research and they think that a financial advisor has the expertise to help do the research. Most financial advisors, however, do not have any special expertise in mutual fund selection.

If you do not have the time or experience to get involved with mutual fund research and then buy the mutual funds directly, you might consider going with index mutual funds as another option. With index mutual funds, at least the total fees are very low.

I hope this helps.


Michael A. Weiss, CFA
The Editor
The Mutual Fund Investor
http://www.mutualfundinvestor.net

You might consider Vanguard or T. Rowe Price.

Of all the Mutual fund companies charging a front end load, this is my favorite. Their funds are in general good funds, some better than others, and their expense ratios are low. Compared to other funds charging a load, yes they do comare outstandingly well. Compared with no load funds, they even beat by far the bottom 1/2 or even 2/3, maybe even 3/4. The main advantage of American Funds is that the initial investment amount is reasonably low, in fact very low. For someone who does not have the $2500 initial deposit for a no load fund, it is a fine choice. As for the Growth Fund, it has a good track record, better than probably 75% of all growth funds load or no load. It however is not well diversified and is loaded with large cap psuedo growth stocks.

A fund that is very similar to the Growth Fund, but is a no load fund and in fact has a better track record is T Rowe Price Capital Appreciation Fund. The returns are not that much different between the two over the long term, but the volitility of the Cap Appr. is a great deal less plus you get 5.75% more for your money. The expense ratio is about 010% more for the Cap Appr fund.

One thing to keep in mind is that as your Roth IRA grows, you should diversify your investments by adding other funds that invest in additional types of companies. In diversification there is less risk.