Is American Funds New World A (NEWFX) a Strong Mutual Fund Pick Right Now?

If you've been stuck searching for Non US - Equity funds, you might want to consider passing on by American Funds New World A (NEWFX) as a possibility. NEWFX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

NEWFX is classified in the Non US - Equity area by Zacks, and this segment is full of potential. Non US - Equity funds focus their investments on companies outside of the United States, which is an important distinction since global mutual funds tend to keep a sizable portion of their portfolio based in the United States. Most of these funds will allocate across emerging and developed markets, and can often extend across cap levels too.

History of Fund/Manager

American Funds is based in Los Angeles, CA, and is the manager of NEWFX. Since American Funds New World A made its debut in June of 1999, NEWFX has garnered more than $15.47 billion in assets. A team of investment professionals is the fund's current manager.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 6.39%, 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 18.04%, 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. Over the past three years, NEWFX's standard deviation comes in at 13.04%, compared to the category average of 11.28%. The fund's standard deviation over the past 5 years is 14.99% compared to the category average of 13.11%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 0.81, so it is likely going to be less volatile than the market at large. 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. NEWFX's 5-year performance has produced a negative alpha of -4.54, which means 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, NEWFX is a load fund. It has an expense ratio of 0.95% compared to the category average of 0.94%. From a cost perspective, NEWFX is actually more expensive than its peers.

While the minimum initial investment for the product is $250, investors should also note that each subsequent investment needs to be at least $50.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

Overall, American Funds New World A ( NEWFX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and higher fees, this fund looks like a somewhat weak choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Non US - Equity, make sure to go to www.zacks.com/funds/mutual-funds for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.

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