Is American Funds Balanced A (ABALX) a Strong Mutual Fund Pick Right Now?
On the lookout for an Allocation Balanced fund? Starting with American Funds Balanced A (ABALX) is one possibility. ABALX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
ABALX is one of many Zacks' Allocation Balanced mutual funds to pick from. Allocation Balanced funds seek to invest in a balance of asset types, like stocks, bonds, and cash, though including precious metals or commodities is not unusual; these funds are mostly categorized by their respective asset allocation. Investors utilize Allocation Balanced funds as a way to get a good start with diversified mutual funds, as well as for core holdings in a portfolio of funds.
History of Fund/Manager
American Funds is based in Los Angeles, CA, and is the manager of ABALX. American Funds Balanced A made its debut in September of 1932, and since then, ABALX has accumulated about $98.98 billion in assets, per the most up-to-date date available. Dina N. Perry is the fund's current manager and has held that role since March of 2006.
Performance
Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 8.01%, and it sits 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 5.42%, which places it in the top third during this time-frame.
It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.
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 ABALX over the past three years is 11.86% compared to the category average of 14.15%. The fund's standard deviation over the past 5 years is 11.7% compared to the category average of 15.05%. 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, so it is likely going to be less volatile than the market at large. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. ABALX has generated a negative alpha over the past five years of -1.94, 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, ABALX is a load fund. It has an expense ratio of 0.57% compared to the category average of 0.95%. So, ABALX is actually cheaper than its peers from a cost perspective.
Investors need to be aware that with this product, the minimum initial investment is $250; each subsequent investment needs to be at least $50.
Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.
Bottom Line
Overall, American Funds Balanced A ( ABALX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.
For additional information on the Allocation Balanced area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into ABALX too for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.
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