What Is the True Cost of Investing? | Capital Group

The Capital Advantage

APRIL 2019

What Is the True Cost of Investing?

Investing in a fund with higher expense ratios can provide better value for investors when the fund also has the potential to outpace the index.
Most experts urge investors to choose investments with the lowest expense ratio, which are typically passively managed index funds. We believe, however, that investment selection is more nuanced than that and should go beyond expense ratios.
Cost ≠ Expense Ratio

Sources: Capital Group and Thomson Reuters Lipper. Hypothetical returns shown are calculated using F-2 shares for the 20-year period ending December 31, 2018.

American Funds Investment Results

Results as of

December 31, 2018

Average Annual Total Returns for Class F-2 Shares (%)



1 Year

5 Years

10 Years

Expense Ratio (%)

The Growth Fund of America® (GFA)






S&P 500 Index






Lipper S&P 500 Index Funds Category Asset-Weighted Average






Hypothetical investment results assume all distributions are reinvested and reflect applicable fees and expenses. The Lipper S&P 500 Index Funds Category Average (“category average”) comprises all funds that are passively managed and commit by prospectus language to replicate the performance of the S&P 500 Index (including reinvested dividends). In addition, S&P 500 Index funds have limited expenses (advisor fee no higher than 0.50%). The Lipper S&P 500 Index Funds Category Average reflects the current composition of all eligible mutual funds (all share classes) within the category. Lipper categories are dynamic and averages may have few funds, especially over longer periods. In this case, between 1976 and 1985, the only fund available in the category was the Vanguard 500 Index Fund (VFINX). Results for Lipper averages do not reflect sales charges. To see the number of funds included in the Lipper category for each fund's lifetime, please see the Quarterly Statistical Update, available on our website.

Asset-weighted average monthly returns of those funds in the Lipper S&P 500 Index Funds Category at the time of analysis, December 31, 2018. Asset-weighting the monthly returns takes into account all share classes available for the period measured across the entire category average. In contrast to an equal-weight fund comparison, this approach more closely approximates the choices investors have made and the experiences they have had. The asset-weighted returns and expenses are based on the most recent total net assets of each of the category's constituents.

Class F-2 shares were first offered on August 1, 2008. Class F-2 share results prior to the date of first sale are hypothetical based on Class A share results without a sales charge, adjusted for estimated annual expenses.

Figures shown are past results and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. View fund expense ratios and returns. 

Returns shown at net asset value (NAV) have all distributions reinvested.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. 

Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility. These risks may be heightened in connection with investments in developing countries. 

When applicable, investment results reflect fee waivers and/or expense reimbursements, without which results would have been lower. 

Expense ratios are as of the most recent prospectus. 

American Funds Distributors, Inc., member FINRA.

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.

Regular investing does not ensure a profit or protect against loss. Investors should consider their willingness to keep investing when share prices are declining.