American Funds Growth and Income: A Treasure Trove of Underlying Funds

The American Funds Growth and Income target-risk series, available through mutual funds and as model portfolios, uses impressive underlying strategies that complement each other well. Its Process rating has been upgraded to Above Average, from Average. Its cheapest share classes and models have been upgraded to a Morningstar Analyst Rating of Silver, from Bronze. The more expensive mutual fund share classes earn Bronze or Neutral ratings.

This series consists of three multi-asset portfolios in mutual funds and five in model portfolios. Unlike

most competitors who target asset-class weightings, this series' eight-person oversight committee allocates to objectives such as "income"(steady dividend payers and fixed-income) and “growth” (stocks with significant upside potential yet elevated risk). The more conservative portfolios therefore lean more into value stocks and the more aggressive portfolios lean more into growth stocks. It’s a reasonable approach and it shows management’s thoughtfulness in tailoring each portfolio to is objective, rather than just scaling a single portfolio up or down to match different risk tolerances.

Although American Funds is best known for its long-term success in equity markets, the bond funds it includes in this series do an excellent job providing protection against falling equity markets without sacrificing returns during more calm markets. The Bond Fund of America that serves as the core fixed-income holding has outperformed its benchmark Bloomberg Barclays U.S. Aggregate Bond Index in both up and down markets for U.S. stocks over the three-years ending February 2021, a rare feat for actively-managed core bond funds.

The firm has also been active in adding resources to its asset allocation team. In 2020, they added four new members to the team, bringing the dedicated research and portfolio management team to 13.

Investors in this series should continue to benefit from the exceptional underlying funds and increased resources on the asset allocation side.

Model portfolios only provide guidance, users must implement their suggested trades and rebalance on their own. Investors’ results will vary depending on how closely they follow this profile’s recommendations.

 (Source: Morningstar)


General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.