We read an interesting article in this month’s Kiplinger’s Personal Finance magazine about the investment giant – American Funds.

 

disclosure note: of the 25+ ETFs & mutual funds we have used, one is from American Funds: Growth Fund of America (AGTHX.lw). The lw stands for load waived (no commission). It falls in asset class: US Large Cap Growth. Unfortunately, it has a 12b-1 fee of 0.25%. This fee goes to Schwab.

 

The Pride:

  • American Funds mutual funds now have more assets than the GDP of most countries on the planet (all but about 15).
  • $1.1T in assets. (beats Vanguard narrowly)
  • All 11 of their equity funds have above average 10 year returns
  • Has 27 funds. Vanguard has over 100 funds.
  • Has 10 of the largest 17 stock funds in the US
  • The largest stock fund there is: AGTHX
  • Lower costs than average. (but more expensive than most of the funds I use)
  • Lower turnover costs than average.
The Shame:

  • All American Funds have 12b-1 fees.
  • All have loads. Some funds are allowed to be placed with investors with the load waived – but the 12b-1 fee cannot be waived.
  • Given that 12b-1 fees were developed to help small / young mutual fund companies with marketing, the presence of 12b-1 fees with American Funds is atrocious.
  • American Funds takes approx $2.7B per year from the investment public and gives it to those in the investment industry – for doing nothing!

We sent an email to Kiplinger’s editor letting them know these points. We’ll be interested to see what (if anything) they make of this. American Funds may be one of their largest advertisers, so we won’t be surprised if they don’t get back to us.