There are plenty of choices in the Mutual Fund Equity Report category, but where should you start your research? Well, one fund that may not be worth investigating is American Funds New Economy 529A (CNGAX). CNGAX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.
History of Fund/Manager
American Funds is based in Los Angeles, CA, and is the manager of CNGAX. The American Funds New Economy 529A made its debut in December of 1983 and CNGAX has managed to accumulate roughly $827.76 million in assets, as of the most recently available information. The fund’s current manager is a team of investment professionals.
Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 5.09%, 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 3.69%, 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. CNGAX’s standard deviation over the past three years is 20.79% compared to the category average of 16.65%. Looking at the past 5 years, the fund’s standard deviation is 18.62% compared to the category average of 14.64%. This makes the fund more volatile than its peers over the past half-decade.
Investors should note that the fund has a 5-year beta of 0.94, which means it is hypothetically less volatile than the market at large. Another factor to consider is alpha, as it reflects a portfolio’s performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. CNGAX’s 5-year performance has produced a negative alpha of -4.22, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Exploring 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 principally on equities that are traded in the United States.
Right now, 93.4% of this mutual fund’s holdings are stocks, and these companies have an average market capitalization of $345.71 billion. Turnover is 34%, which means, on average, the fund makes fewer trades than its comparable peers.
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, CNGAX is a load fund. It has an expense ratio of 0.77% compared to the category average of 1.10%. Looking at the fund from a cost perspective, CNGAX 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.
Overall, American Funds New Economy 529A ( CNGAX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.
Don’t stop here for your research on Mutual Fund Equity Report funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare CNGAX to its peers 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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