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Is American Funds Growth Fund of America R6 (RGAGX) a Strong Mutual Fund Pick Right Now?

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Looking for a Large Cap Growth fund? You may want to consider American Funds Growth Fund of America R6 (RGAGX) as a possible option. RGAGX bears a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

RGAGX is part of the Large Cap Growth section, and this segment boasts an array of other possible options. Large Cap Growth mutual funds purchase stakes in numerous large U.S. companies that are expected to develop and grow at a faster rate than other large-cap stocks. Companies are usually considered to be large-cap if their market capitalization is over $10 billion.

History of Fund/Manager

American Funds is based in Los Angeles, CA, and is the manager of RGAGX. American Funds Growth Fund of America R6 debuted in May of 2009. Since then, RGAGX has accumulated assets of about $27.71 billion, according to the most recently available information. The fund is currently managed by a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of 14.91%, 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 19.41%, which places it in the top third during this time-frame.

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 RGAGX over the past three years is 10.14% compared to the category average of 8.89%. The fund's standard deviation over the past 5 years is 10.11% compared to the category average of 8.66%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment.

Investors should note that the fund has a 5-year beta of 0.98, so it is likely going to be as volatile as the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. RGAGX's 5-year performance has produced a positive alpha of 1.18, which means managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Examining the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is mostly on equities that are traded in the United States.

Right now, 75.61% of this mutual fund's holdings are stocks, and these companies have an average market capitalization of $221.67 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Other
  3. Finance

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, RGAGX is a no load fund. It has an expense ratio of 0.33% compared to the category average of 1.10%. From a cost perspective, RGAGX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $250; each subsequent investment needs to be at least $50.

Bottom Line

Overall, American Funds Growth Fund of America R6 ( RGAGX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, American Funds Growth Fund of America R6 ( RGAGX ) looks like a somewhat average choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Large Cap Growth, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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