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

·4-min read

Large Cap Value fund seekers may want to consider taking a look at American Funds Income Fund of America A (AMECX). AMECX has a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Large Cap Value mutual funds invest in stocks with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value; this value investing strategy often leads to low P/E ratios and high dividend yields, though growth levels are often curtailed. The high-growth opportunity of these funds are slowed even further, as large-cap securities are generally in stable industries with low to moderate growth prospects. Therefore, Large Cap Value funds are usually more appealing to investors who are interested in a stable income stream.

History of Fund/Manager

AMECX is a part of the American Funds family of funds, a company 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 $74.85 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 carries a 5-year annualized total return of 9.6%, 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 10.11%, which places it in the middle 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. Over the past three years, AMECX's standard deviation comes in at 12.07%, compared to the category average of 15.04%. The standard deviation of the fund over the past 5 years is 9.83% compared to the category average of 12.44%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 0.62, which means it is hypothetically 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. AMECX has generated a negative alpha over the past five years of -1.32, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, AMECX is a load fund. It has an expense ratio of 0.56% compared to the category average of 1%. So, AMECX is actually cheaper than its peers from a cost perspective.

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 neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a somewhat average choice for investors right now.

This could just be the start of your research on AMECXin the Large Cap Value 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. 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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