Technology

Is American Funds New Economy A (ANEFX) a Strong Mutual Fund Pick Right Now?

Any investors hoping to find a Global - Equity fund might consider looking past American Funds New Economy A (ANEFX). ANEFX possesses a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes ANEFX as Global - Equity, which is a segment packed with options. Global - Equity mutual funds invest in large markets like the U.S., Europe, and Japan, and operate with very few geographical limitations. They also provide an investment technique that leverages the diverse nature of the global economy in the hopes of providing a stable return.

History of Fund/Manager

American Funds is responsible for ANEFX, and the company is based out of Los Angeles, CA. American Funds New Economy A made its debut in December of 1983, and since then, ANEFX has accumulated about $12.19 billion in assets, per the most up-to-date date available. A team of investment professionals is the fund's current manager.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 10.49%, and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 15.54%, 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. ANEFX's standard deviation over the past three years is 12.85% compared to the category average of 9.39%. The fund's standard deviation over the past 5 years is 13.05% compared to the category average of 9.58%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

It's always important to be aware of the downsides to any future investment, so one should not discount the risks that come with this segment. ANEFX lost 51.95% in the most recent bear market and outperformed its peer group by 1%. This could mean that the fund is a better choice than comparable funds during a bear market.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. ANEFX has a 5-year beta of 0.98, which means it is likely to be as volatile as the market average. 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 -0.35. This means that 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, ANEFX is a load fund. It has an expense ratio of 0.78% compared to the category average of 1.12%. From a cost perspective, ANEFX 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.

Bottom Line

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

Your research on the Global - Equity 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. 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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Zacks Investment Research

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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