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

Any investors hoping to find a Large Cap Growth fund could think about starting with American Funds Growth Fund of America A (AGTHX). AGTHX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

AGTHX is classified in the Large Cap Growth segment by Zacks, an area full of possibilities. Companies are usually considered to be large-cap if their stock market valuation is more than $10 billion. Large Cap Growth mutual funds invest in many large U.S. firms that are projected to grow at a faster rate than their large-cap peers.

History of Fund/Manager

AGTHX finds itself in the American Funds family, based out of Los Angeles, CA. American Funds Growth Fund of America A debuted in December of 1973. Since then, AGTHX has accumulated assets of about $164.98 billion, according to the most recently available information. 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 10.48%, and it sits in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 20.32%, which places it in the top 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, AGTHX's standard deviation comes in at 15.57%, compared to the category average of 11.3%. Over the past 5 years, the standard deviation of the fund is 18.31% compared to the category average of 13.22%. 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 1.13, which means it is hypothetically more 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. With a negative alpha of -2.85, 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, AGTHX is a load fund. It has an expense ratio of 0.60% compared to the category average of 0.94%. From a cost perspective, AGTHX is actually cheaper than its peers.

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 consideration. Returns would be less if those were included.

Bottom Line

Overall, American Funds Growth Fund of America A ( AGTHX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, worse downside risk, and lower fees, American Funds Growth Fund of America A ( AGTHX ) looks like a good potential choice for investors right now.

This could just be the start of your research on AGTHX in the Large Cap Growth category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.

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