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

If you've been stuck searching for Mutual Fund Equity Report funds, you might want to consider passing on by American Funds New Economy A (ANEFX) as a possibility. ANEFX carries 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 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 $13.66 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 8.42%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 6.06%, 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. Over the past three years, ANEFX's standard deviation comes in at 20.05%, compared to the category average of 15.52%. The standard deviation of the fund over the past 5 years is 18.12% compared to the category average of 13.87%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

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 0.97, which means it is likely to be as volatile as the market average. 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. ANEFX has generated a negative alpha over the past five years of -3.37, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

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 largely on equities that are traded in the United States.

This fund is currently holding about 82.34% stock in stocks, with an average market capitalization of $345.71 billion. With turnover at about 34%, this fund is making fewer trades than its comparable peers.

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, ANEFX is a load fund. It has an expense ratio of 0.74% compared to the category average of 1.11%. From a cost perspective, ANEFX is actually cheaper than its peers.

While the minimum initial investment for the product is $250, investors should also note that each subsequent investment needs to be at least $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.

For additional information on this product, or to compare it to other mutual funds in the Mutual Fund Equity Report, make sure to go to www.zacks.com/funds/mutual-funds for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.

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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.