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

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On the lookout for a Large Cap Value fund? Starting with American Funds Income Fund of America A (AMECX) should not be a possibility at this time. AMECX possesses a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

AMECX is classified in the Large Cap Value segment by Zacks, which is an area full of possibilities. Investors interested in a stable income stream fund these mutual funds very appealing because they have a unique investing strategy. Large Cap Value funds invest in stocks with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value. This tactic often leads to low P/E ratios and high dividend yields; however, these funds'high growth opportunity are often slowed, as large-cap securities are generally in stable industries with low to moderate growth prospects.

History of Fund/Manager

AMECX finds itself in the American Funds family, based out of Los Angeles, CA. American Funds Income Fund of America A made its debut in December of 1970, and since then, AMECX has accumulated about $75.28 billion in assets, per the most up-to-date date available. 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 6.1%, and it sits in the bottom 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 7.17%, which places it in the bottom 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. AMECX's standard deviation over the past three years is 6.22% compared to the category average of 8.58%. The fund's standard deviation over the past 5 years is 7% compared to the category average of 8.74%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. AMECX lost 42.42% in the most recent bear market and outperformed comparable funds by 8.28%. This makes the fund a possibly better choice than its peers during a sliding market environment.

Investors should note that the fund has a 5-year beta of 0.65, so it is likely going to be less volatile than 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. Over the past 5 years, the fund has a negative alpha of -1.2. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, AMECX is a load fund. It has an expense ratio of 0.55% compared to the category average of 1.03%. AMECX is actually cheaper 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.

Bottom Line

Overall, American Funds Income Fund of America A ( AMECX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and lower fees, American Funds Income Fund of America A ( AMECX ) looks like a somewhat weak choice for investors right now.

Your research on the Large Cap Value segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer 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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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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