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American Funds - first timer

So now that American funds are available NTF, I've been toying with DCAing a small amount every month in them. Needless to say I will do so opportunistically, not regularly. Low minimum is attractive. However, I'm still distressed from the fact they used to be a load shop and from M* over the top praise for this fund family.

Given my age, I was thinking about the following funds instead of all equity funds. Thinking these are a little less aggressive and since I still have some hair left, reasonably steady.

BALFX, IFAFX, CIBFX, GBLEX.

The idea is to start with $250 in each = $1000, and then repeat $1000 multiple times. Eventually I would stop at $10K in each fund invested over time. This was money I was keeping aside for my daughter's college, and I'm happy to say it does not look like we will need as much as I thought we would (good I married smart and there was appropriate gene transfer). Now I don't want to buy more funds than I need so if only one or two would likely achieve the same outcome, I would rather do that. Starting this post with the hope those who have invested in American funds can offer some insight/opinion.
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Comments

  • edited February 2017
    I've held various equity AF's for years in a taxable account (some you mention), my 403(b) is entirely in their cheapest WaMu fund class, and I have been quite pleased thus far with them all. I appreciate AF's investment style, philosophy, and approach -- and their ERs are quite reasonable for (now) no-load funds.

    I don't own any of their balanced funds, so can't comment there, sorry.
  • Let me second what rforno wrote. They are a solid, conservatively manged fund house without esoteric funds. In other words, boring like Vanguard. Similarly solid. Not quite as low cost, but as noted above, fairly priced.

    While you may not appreciate M*'s opinions, its star ratings (backward looking) are more objective. M* shows American Funds' asset-weighted (I think) fund ratings to be: 4.0 (domestic), 4.3 (international), 4.2 (muni), 2.4 (taxable bond). That compares favorably with Vanguard at 4.0, 3.1, 4.0, and 3.3. It probably looks good compared with any large fund house.

    With respect to load families, keep in mind that PIMCO, Loomis Sayles, American Century, etc. are load families. According to M*'s data, even T. Rowe Price sells some load shares (1.9% of its AUM) as does Doubleline (0.2% AUM).

    IMHO what matters is how much you pay for access, not how much others pay.
  • @msf I get what you are saying about loads. However, for the longest time American funds retailed only through loads. So if you didn't have an institutional account, you were out of luck.

    I did see the SAIs, and saw $1MM investements of its lead manager in all funds. Other managers however own around $100K. Given the asset size of these funds, I want to do a little more research.

    Comparing with Vanguard - if they are anything like Vanguard, I would be silly to worry. I'm also looking at Franklin Mutual funds that may be available without load to me. Thanks for the endorsement on American funds.
  • Hi VF,

    I feel, you are a pretty skilled investor to present such a question to the board. My comments are not ment to be investment advice ... etc.

    I have owned American Funds for many years, since the late 50's early 60's; and, I currently own three of the funds you have listed (but A share class). I feel they are a fine large cap fund shop. In doing an Instant Xray on your subject hypothetical portfolio consisting of each fund you list in the amount $250.00 each I am seeing a good bit of duplication. With this, and if it were for my own portfolio, I'd add the Small Cap World Fund and drop the Global Balanced Fund to gain some exposure in the small/mid cap space.

    I have linked the data entry page for Morning's Stars Instant Xray analysis. This might be something you'd benefit by spending a little time with. In addition, I'd do a risk tolerance and need analysis on yourself to see if what you have assembled fits with your investor profile determined by the analysis.

    Old_Skeet
  • I have been in and out of AF over the years, but usually when I was using a broker who pushed them. I never found them to be very helpful or much better than an index fund.

    It is hard to imagine how any fund manger running Billions can do any better than an index. If you want big funds like that I would stick with Vanguard
  • @Old_Skeet There are always things about a fund family you know when you have invested with them for a while.

    @sma3 Exactly! In and out of American Funds. I am certainly worried if they have to be bought at the bottom of the market and whether they are better than others with similar funds. Their lower expense ratios might be an edge, but there is always Vanguard Balanced Index to consider. There are not many NTF options at TIAA that I don't already own that are acceptable. I might dip my toe in AF soon, but will be very careful. When you buy vs What you buy always triumphs.
  • If I were looking at Vanguard for a traditional balanced fund, I'd be more inclined to go with Wellington. Even Bogle has been critical of using Barclays US Aggregate as an index to track (too laden with Treasuries). But that's what you'll get as the fixed income portion of VBINX.
  • Am Funds is primarily a large cap shop. That is their bread and butter. Some years they will do a bit better than their benchmark, some years they underperform some. As another poster said, when you own hundreds of stocks, it is darned hard to consistently beat the index. And if there is no downside outperformance, and since the fees are still higher than an index, for me it's almost a no-brainer. Go with the index fund.
  • edited February 2017
    Hey American Funds - first timer ... (aka @VintageFreak),

    Better take a closer look at those F shares ... I'm thinking most F shares are C share converts and the only way to come by them is to first buy C shares and over time (10 years) let them convert to F shares. Not sure if this is so; but, if you are sincerely interested you might pick up the phone and call American Funds to comfirm or dispel. Their listed phone number is 1-800-421-4225.

    In addition, I believe, some F shares can be bought out right and are for advisor wrap account purchase programs. So, I'm thinking, although the F shares expense ratios might be low compared to A shares with sales loads some F shares will be subject to on-going advisor/broker wrap account fees and charges. Invest a million with them and I believe they will wave sales charges on their A share funds.

    With this, I'm thinking there is just no "free lunch" for the American Funds small retail investor. However, I do admire you for trying to find one.

    Skeet
  • "With this, I'm thinking there is just no "free lunch" for the American Funds small retail investor. However, I do admire you for trying to find one."

    Well, you are paying a 12b-1 fee (F-1 shares) that goes to brokers for NTF shelf space, so it's not exactly a free lunch. But that lunch doesn't cost more than dining on, say, DLTNX or any other NTF fund that's paying for shelf space.

    Schwab and Fidelity offer 57 American Funds NTF (e.g. CIBFX at Schwab and at Fidelity). This is a new arrangement that was set up a couple of months ago.

    Note that this is not the first time that American Funds has made class F shares available NTF. Around 2004, American Funds sold the shares NTF through some lesser known brokerages. It took me a fair amount of digging to find any info, but apparently this fact had been posted to misc.invest.mutual-funds in mid-2004 with a link to Firstrade's American Fund page.

    That link no longer works, of course, and Firstrade is not one of the brokers American Funds is working with this time around. Also back then, the shares were called class F. It wasn't until a few years later, when American Funds added class F-2 (F shares without the 12b-1 fee) that the name was changed to F-1.

    I know you can't believe everything you read on the internet, but if I see something that I had posted myself, well that's good enough for me. :-)
  • I'm investing in the Balanced fund (class R shares) in my 401k account with my current employer. The fee is pretty low for that share class. We only had American Fund choices and I chose this fund as being relatively reliable.

    This is a job to tide me over until actual retirement in five years or so and I'm just putting in the 6% to get the match. It is all going into this fund and I've been happy with it so far.
  • edited February 2017
    Yeah - if you can get a "high number" R-class (ie, R-5 or R-6) w/the AFs you are in good shape. I've got R-6 shares (no load, no 12b1, VERY low ER) in my 403(b) and am quite pleased.
    billr said:

    I'm investing in the Balanced fund (class R shares) in my 401k account with my current employer. The fee is pretty low for that share class. We only had American Fund choices and I chose this fund as being relatively reliable.

    This is a job to tide me over until actual retirement in five years or so and I'm just putting in the 6% to get the match. It is all going into this fund and I've been happy with it so far.

  • edited February 2017
    Hello,

    For those interested, linked below is information on American Funds different share classes.

    https://www.americanfunds.com/individual/investments/share-class-information/share-class-pricing.html

    Click on the F shares to view the different type of F shares available and details about these shares.

    And, below is another link that covers frequently asked questions about fund shares.

    https://www.americanfunds.com/individual/service-and-support/other-resources/share-classes-pricing-options.html

    Click on the C share conversion tab for more information about C shares converting to F-1 shares.

    I think this should posture my comments made in this thread earlier and clear the confusion that some might have.

    Best regards,

    Old_Skeet
  • C-class shares should be outlawed. NO ONE except the broker benefits from these. If this is the only way some investors can eventually get to F-class shares, go somewhere else. It wasn't very long ago that folks who were sold C-class shares were told "these are no-commission funds". Yeah, no upfront load. Just a killer annual 12b-1 that goes to the broker-dealer and salesperson.
  • edited February 2017
    Hello and @BobC,

    I have got to agree with you on Class-C shares. While some buy these (or are sold Class C shares) they are indeed not for me! At one time, a broker that was after my business pitching Class-C shares ... and, I never (ever) went back there or returned his calls.

    In addition, I have a concern with Class B shares as well.

    For me, it is Class A shares. Although, I am subject to upfront sales loads, on some new purchases, I have found the on-going expenses to be lower. With this, from my perspective, they are the best deal for the long term investor. Once invested in A shares an ivestor can move around through nav exchanges within the same family of funds without having to pay another sales commission. In fact, I have been able to move from one fund to another throuh nav exchanges within the same family of funds with no direct expense to me whatsoever.

    Now, I know A Shares are not for everyone; but, it is what I started with. And, for me, they are indeed keepers.

    I wish ... all ... "Good Investing."

    Skeet
  • Thank you all. I'm looking at Balanced and Global Balanced at this time. They seem to have deliver the smoothest ride. F1 shares are still cheaper than other like funds. Options at TIAA are limited in NTF space.
  • edited February 2017
    Linked below is an interesting article (January 30, 2017) by Kiplinger on American Funds F1 shares and where they can currently be purchased without a sales charge. The article does not state wheather there is a wrap fee on the account that would hold F1 shares or a transaction fee for the purchases themselves. I'm thinking, there are going to be some fees somewhere associated with F share purchases.

    http://www.kiplinger.com/article/investing/T041-C007-S001-how-to-buy-american-funds-without-a-sales-charge.html
  • msf
    edited February 2017
    OS: "The article does not state wheather there is a wrap fee on the account that would hold F1 shares or a transaction fee for the purchases themselves. I'm thinking, there are going to be some fees somewhere associated with F share purchases"

    Repeating myself: Schwab and Fidelity offer 57 American Funds NTF (e.g. CIBFX at Schwab and at Fidelity). This is a new arrangement that was set up a couple of months ago.

    Check out the links I provided. If Schwab were to add fees on its AF NTF funds, it would be cheapening its OneSource™ brand and SelectList® service. I realize that one should be suspicious of things that seem too good to be true, but given that lots of other load families are making their funds available load-waved, NTF, but carrying 0.25% 12b-1 fees, does this move by AF really seem too good to be true, or just good?

    BobC: "C-class shares should be outlawed. "

    While I concur with the sentiment, I fail to see the difference between class C and wrap accounts. I'll use the same fund as above: Capital Income Builder, to compare.

    Class C (CIBCX):      1.40% ER + 0% advisor costs = 1.40% total cost of ownership
    Wrap/Class F-2 (CAIFX): 0.40% ER + 1% wrap fee = 1.40% total cost of ownership
    Wrap/Class F-1 (CIBFX): 0.67% ER + 1% wrap fee = 1.67% total cost of ownership

    Reverse churning appears to be a similar risk either way.
  • Just FYI, I entered order for BALFX for $250 at TIAA. Why? Because it clearly says for F1 shares, fund is NTF and minimum investment is $250.

    Then they reject my order. Jokers! I'm already regretting opening account with them.
  • Try Schwab.

    image
  • Schwab has lots of load waved A shares for many good funds. Don't need to settle for American Funds. For example, I own SGENX, NTF, load waved and listed on their income list if that's what you're after. Also a world allocation fund that has better results then the 2 American world allocation funds mentioned. Low starting investment, $100

    Just food for thought.

  • edited February 2017
    @Old_Joe, @MikeM. That's not the point. I build separate portfolios at each brokerage so I don't want more funds at Schwab/Fido. I opened TIAA account only because it showed they had certain funds NTF, e.g. American, Franklin Mutual, etc.

    I'm just ticked off they rejected my order, but more importantly at least say why. There are other funds that have $0 minimum listed. My orders for various amounts got rejected. I can't keep rolling the dice increasing the size of my order.

    I'm almost contemplating closing the account. The problem is I don't want to open account at E*Trade. That would carry the same amount of aggravation I have for doing business with Wells Fargo.

    I own FEBAX @Schwab.
  • did you call or msg them?
  • msf
    edited February 2017
    Different brokerages have different deals with various fund families. Currently, AF has deals with Schwab and Fidelity (only, AFAIK) to allow F-1 shares to be purchased by retail investors.

    This is not a new share class, it is by definition NL, and has generally been available since shortly after inception (2001) at many brokerages. But sale of this class is usually restricted to advisors (what M* denotes as 'A' on its fund purchase pages).

    This is a very normal situation. How many times have we seen posts here asking: Does anyone know where I can get fund X? Or, why is my brokerage forcing me to use an advisor to get fund Y? Or, I can't get fund Z NTF at my brokerage any more, where could I still buy it?

    For example, Scottrade says that it sells CIBFX NTF. Yet read Scottrade's page for these F-1 shares:
    ! CIBFX is an Advisor Class fund, which is available to investors who are working with a Scottrade® Advisor Services Registered Investment Advisor.
    https://research.scottrade.com/qnr/Public/MutualFunds/Summary?symbol=CIBFX
  • did you call or msg them?

    Yeah, and that's the most frustrating part. They don't seem to get my frustration at how ridiculously they are running their operation. I feel they don't want me as a client any more than I don't want then as my brokerage.

    I'm going to wait till minimum period of waiting for my MF holdings is over, sell and then bail. My money is sorta blocked until then, but luckily I didn't invest a whole lot.

    Several years ago, I had an equally silly experience with them and vowed never to return. Age cooled me, and they were now competing with my attention against the likes of E*Trade. I'm thinking I'll just open another second account with Schwab and run a parallel portfolio. Not sure if that's possible.
  • edited February 2017
    @msf - exactly. Scottrade is clear on what they are doing. It is a pity they sold to Ameritrade. At least they didn't sell to TIAA:-O

    I would be fine if TIAA did what they said. They are saying something, doing something else, and then not saying anything about what they are not doing.
  • edited February 2017
    VF, at Fidelity the minimum is $2500 for the inicial purchase of F1 shares. Maybe you need to investigate what the minimum is at your brokerage?
  • edited February 2017
    F1 and F3 are different. The latter are a reaction to the new Fiduciary rules.
  • VF, at Fidelity the minimum is $2500 for the inicial purchase of F1 shares. Maybe you need to investigate what the minimum is at your brokerage?

    dude... TIAA clearly says minimum is $250 and additional is $50 for F-1 shares. It has NTF logo displayed prominently as well. Can we just agree TIAA is the culprit here, not me and move on:-D
  • Many of AF's retirement dated funds are M* (5*) funds with ER close to (.7).
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