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Is American Funds Growth Fund of America C (GFACX) a Strong Mutual Fund Pick Right Now?

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If you have been looking for Large Cap Growth fund category, a potential starting could be American Funds Growth Fund of America C (GFACX - Free Report) . GFACX carries a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.

Objective

We classify GFACX in the Large Cap Growth category, an area rife with potential choices. Large Cap Growth funds invest in many large U.S. companies that are expected to grow much faster compared to other large-cap stocks. To be considered large-cap, companies must have a market cap over $10 billion.

History of Fund/Manager

American Funds is based in Los Angeles, CA, and is the manager of GFACX. American Funds Growth Fund of America C debuted in March of 2001. Since then, GFACX has accumulated assets of about $3.66 billion, according to the most recently available information. The fund's current manager is a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 13.86%, and is in the middle third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3 -year annualized total return of 5.29%, which places it in the bottom 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 GFACX over the past three years is 20.3% compared to the category average of 14.68%. Over the past 5 years, the standard deviation of the fund is 19.94% compared to the category average of 15.49%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. GFACX has a 5-year beta of 1.06, 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. Over the past 5 years, the fund has a negative alpha of -1.43. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, GFACX is a no load fund. It has an expense ratio of 1.38% compared to the category average of 0.95%. GFACX is actually more expensive than its peers when you consider factors like cost.

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 considiration. Returns would be less if those were included.

Bottom Line

Overall, even with its comparatively similar performance, average downside risk, and higher fees, American Funds Growth Fund of America C ( GFACX ) has a neutral Zacks Mutual Fund rank, and therefore looks a somewhat average choice for investors right now.

Don't stop here for your research on Large Cap Growth funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare GFACX to its peers as well for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.


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