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RETIREMENT PLAN INVESTOR

Use your plan ID (available on your account statement) to determine which employer-sponsored retirement plan website to use:

IF YOUR PLAN ID BEGINS WITH IRK, BRK, 1 OR 2

Visit americanfunds.com/retire

IF YOUR PLAN ID BEGINS WITH 34 OR 135

Visit myretirement.americanfunds.com

FIXED INCOME

For more balanced portfolios, think four roles

FOUR ROLES

Income is important, but it's not the whole story.

For real balance, the fixed income in your portfolio should actually offer a combination of 4 roles.

IN ACTION

Ideas for putting the 4 roles to work in your portfolio

Diversification from equities

The bond funds shown below are among those that have shown resilience when stocks have struggled. 

 

Cumulative returns for select taxable and tax-exempt core bond funds during the five largest equity market declines since 2009 — Class F-2 (%)

This exhibit shows the five largest equity market decline periods, as measured by the S&P 500 Index, since 2009. In all periods, the taxable and tax-exempt funds shown returned between -9.1% and 6.1%, while the equity index returned between -12.7% and -33.8%. American Funds shown include: The Bond Fund of America, American Funds Strategic Bond Fund, The Tax-Exempt Bond Fund of America, and Limited Term Tax-Exempt Bond Fund of America using the F-2 share class. In each period the funds sharply outpaced the equity index, providing strong diversification.

Sources: Capital Group, Morningstar.

As of 6/30/20, the average annual total returns for Standard & Poor’s 500 Composite Index were: one year: 7.51%; five years: 10.73%; 10 years: 13.99%.

The market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index. Dates shown are representative of the five largest equity market declines (without dividends reinvested) in the unmanaged S&P 500 with at least 50% recovery persisting for more than one business day between declines. The returns are based on total returns. There have been periods when the funds have lagged the index, such as in rising equity markets. American Funds Strategic Bond Fund returns shown for the two most recent periods, which followed its launch on 3/18/16.

 

Income

Our range of bond funds offer different levels of potential income, including funds pursuing higher yields for investors who are comfortable with greater volatility. 

Average yield to maturity

This exhibit shows a bar chart representing average yield to maturity for seven American Fund bond funds. The first cluster of three bars has a caption that reads: "Moderate income potential: examples of funds that could be considered for a core (or core-plus, in the case of Strategic Bond Fund) allocation." These include American Funds Strategic Bond Fund, The Bond fund of America and The Tax-Exempt Bond Fund of America, which had average yield to maturity of 1.3%, 1.6% and 4.6%, respectively. The second cluster of four bars has this caption: "Higher income potential: examples of funds that could be considered for an enhanced income allocation." These include American Funds Multi-Sector Income Fund, American Funds Emerging Markets Bond Fund, American High-Income Municipal Bond Fund and American High-Income Trust, which had average yield to maturity of 5.4%, 5.7%, 6.9% and 7.6%, respectively. The two tax-exempt bond fund yields shown are taxable-equivalent yields, assuming an investor is in the highest tax bracket.



*Taxable-equivalent yield to maturity: Based on a federal marginal tax rate of 37%, the top 2020 rate. In addition, we have applied the 3.8% Medicare tax, which comes to a combined 40.8% marginal tax rate on the investment income for taxpayers in the highest tax bracket. Taxableequivalent 30-day SEC yields as of June 30, 2020, for The Tax-Exempt Bond Fund of America and American High-Income Municipal Bond Fund were 2.89% and 5.32%, respectively. View funds SEC yields.

Source: Capital Group, as of June 30, 2020.

Capital preservation

Mostly focused on higher quality bonds, the shorter term funds highlighted below have consistently generated positive total returns. 

Positive three-year rolling return, since fund inception — Class F-2

This exhibit shows four pie charts, each shaded fully at 100% representing four funds that have recorded positive three-year rolling returns since their fund inception, using the F-2 share class. These funds are Short-Term Bond Fund of America, Intermediate Bond Fund of America, Limited Term Tax-Exempt Bond Fund of America, and American Funds Short-Term Tax-Exempt Bond Fund of America.

Short-Term Bond
Fund of America

Intermediate Bond
Fund of America

Limited Term Tax-Exempt Bond Fund of America

American Funds Short-Term Tax-Exempt Bond Fund

Source: Morningstar.
Data as of 6/30/20. Based on results of Class F-2 shares.

Inflation protection

TIPS-focused funds can serve as a complement to other fixed income investments that may not hold up so well amid inflation.

Treasury Inflation-Protected Securities (TIPS) vs. Consumer Price Index (CPI)

This exhibit is a combo line-contour chart covering the period from the start of 2019 through mid-2020. The line chart for the Treasury Inflation-Protected Securities adjusted principal, climbed from nearly 1.09 to about 1.15 over this period. The Consumer Price Index (CPI) contour chart trended up from a value of roughly 237 to nearly 258, tracking the line chart fairly closely, indicating that TIPS have provided decent inflation protection.

Source: Refinitiv Datastream, as of 6/30/20.

How does your investment stack up?

Use our new comparison tool to dive deeper and explore how your investment stacks up, even in periods of market instability.

EXPLORE

Explore funds by role

Our bond funds aim to serve the four roles of fixed income in different combinations and to varying degrees.

Four roles in one fund?

Seek more from Core, with The Bond Fund of America® 

Explore our fixed income funds

Information you need to find the right funds for your clients

Fixed income insights

Must-read macro and investment perspectives from Capital

More help with portfolio construction

From model portfolios to a personal consultation with a portfolio specialist, Capital Group has a range of resources to help you.

 

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/or returns will vary, so investors may lose money. Investing for short periods makes losses more likely. View fund expense ratios and returns

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. 

The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal than higher rated bonds. Bond ratings, which typically range from AAA/Aaa (highest) to D (lowest), are assigned by credit rating agencies such as Standard & Poor's, Moody's and/or Fitch, as an indication of an issuer's creditworthiness. If agency ratings differ, the security will be considered to have received the highest of those ratings, consistent with the fund's investment policies. (For American High-Income Municipal Bond Fund and American High-Income Trust, such securities are placed in the lowest category.) Securities in the Unrated category have not been rated by a rating agency; however, the investment adviser performs its own credit analysis and assigns comparable ratings that are used for compliance with fund investment policies. Investments in mortgage-related securities involve additional risks, such as prepayment risk, as more fully described in the prospectus. While not directly correlated to changes in interest rates, the values of inflation-linked bonds generally fluctuate in response to changes in real interest rates and may experience greater losses than other debt securities with similar durations. 

State-specific tax-exempt funds are more susceptible to factors adversely affecting issuers of their states' tax-exempt securities than more widely diversified municipal bond funds. Income from municipal bonds may be subject to state or local income taxes and/or the federal alternative minimum tax (except for The Tax-Exempt Bond Fund of America). Certain other income, as well as capital gain distributions, may be taxable. 

The use of derivatives involves a variety of risks, which may be different from, or greater than, the risks associated with investing in traditional cash securities, such as stocks and bonds. American Funds Strategic Bond Fund may engage in frequent and active trading of its portfolio securities, which may involve correspondingly greater transaction costs, adversely affecting the fund's results.

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

There may have been periods when the fund(s) lagged the index(es). Certain market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index. 

Investment results assume all distributions are reinvested and reflect applicable fees and expenses. 

When applicable, investment results reflect fee waivers and/or expense reimbursements, without which results would have been lower. Read details about how waivers and/or reimbursements affect the results for each fund. View results and yields without fee waiver and/or expense reimbursement.

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 the results of the original share class of the fund without a sales charge, adjusted for typical estimated expenses. Results for certain funds with an inception date after August 1, 2008, also include hypothetical returns because those funds' Class F-2 shares sold after the funds' date of first offering. View dates of first sale and specific expense adjustment information for Class F-2 shares. 

The Capital Group companies manage equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups. 

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.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.

The Standard & Poor's 500 Composite Index is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Capital Group. Copyright © 2020 S&P Dow Jones Indices LLC, a division of S&P Global, and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC.

Bloomberg® is a trademark of Bloomberg Finance L.P. (collectively with its affiliates, "Bloomberg"). Barclays® is a trademark of Barclays Bank Plc (collectively with its affiliates, "Barclays"), used under license. Neither Bloomberg nor Barclays approves or endorses this material, guarantees the accuracy or completeness of any information herein and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

© 2020 Morningstar, Inc. All Rights Reserved. Except for Lipper rating information, the information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar, its content providers nor the American Funds are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. Information is calculated by Morningstar. Due to differing calculation methods, the figures shown here may differ from those calculated by American Funds.

Past results are not predictive of results in future periods.

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