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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, 2 OR 754

Visit americanfunds.com/retire

IF YOUR PLAN ID BEGINS WITH 34 OR 135

Visit myretirement.americanfunds.com

Portfolio construction

Where do we go from here?

Your clients need personalized solutions in times of uncertainty

With a global pandemic, economic and market volatility, and a politically charged environment, investors may be seeking advice about how to proceed. In times of uncertainty, it’s important not to lose sight of the longer term and use this as an opportunity to review your clients’ investment goals. Our objective-based, flexible approach to combining funds and strategies goes beyond asset allocation alone to help you create portfolio solutions that may address your clients’ needs, time horizons and risk tolerance.

Risk-averse

Portfolio solutions that have delivered resilience through market corrections

Rethink the core

Balancing income and lower volatility amid market fluctuations

Opportunistic

Flexibility during times of market volatility can create opportunity

Risk-averse

Portfolio solutions that have delivered resilience through market corrections

When market uncertainty hits, investors may want to seek refuge in perceived safe havens, such as cash or Treasuries. But for investors willing to accept the risks of equity investing, there may be more effective solutions that don’t require large asset allocation changes, such as upgrading core equity, focusing on quality dividends and seeking to ensure that core bonds provide diversification from equity, all while striving for downside protection.

Since 2010, a hypothetical 60/40 combination of American Mutual Fund® (AMF) and The Bond Fund of America® (BFA) generally would have delivered greater excess returns during drawdowns versus a traditional 60/40 Standard & Poor's 500 Composite Index and Bloomberg Barclays U.S. Aggregate Index benchmark blend

In this top chart, the light blue bars correspond to the excess returns provided by the American Funds hypothetical portfolio blend versus the index blend during drawdowns. The bottom chart shows the returns of the blends over the drawdowns. The American Funds blend is represented with a dark blue bar and the index blend with a gray bar. During the Flash crash (4/23/10 to 7/2/10), our American Funds would have provided 1.98% excess returns. During the U.S. debt downgrade (4/29/11 to 10/3/11), the American Funds hypothetical portfolio would have delivered 1.98% excess return. During the China slowdown (5/21/15 to 8/25/15), the American Funds hypothetical portfolio would have delivered -0.22%. During the oil price shock (11/3/15 to 2/11/16), the American Funds hypothetical portfolio would have delivered 1.61% in excess returns. During the U.S. inflation/rates scare (1/26/18 to 2/8/18), the American Funds hypothetical portfolio would have delivered 0.79% in excess returns. During the global selloff (9/20/18 to 12/24/18), the American Funds hypothetical portfolio would have delivered 4.04% in excess returns. During the coronavirus crisis, the American Funds (2/19/20 to 3/23/20) hypothetical portfolio would have delivered 2.60% in excess returns.
Sources: Capital Group, Morningstar. Data is based on Class F-2 shares. Dates shown for market corrections are based on price declines of 10% or more (without dividends reinvested) in the unmanaged S&P 500 with at least 50% recovery persisting for more than one business day between declines.

AMRFX (F-2)

American Mutual Fund

American Mutual Fund invests primarily in well-established companies with strong balance sheets and a history of consistently paying dividends, helping to provide downside resilience. The fund strives for the balanced accomplishment of three objectives: current income, growth of capital and conservation of principal.

ABNFX (F-2)

The Bond Fund of America

The Bond Fund of America takes a True Core approach — offering the balance, discipline and consistency that we believe provides better portfolio outcomes. It has the ability to invest in every sector of the bond market, with a limited number of below-investment-grade holdings.

Rethink the core

Seeking balance amid market fluctuations

With income and stability in mind, American Funds® Conservative Growth and Income Model Portfolio leverages dividend-paying stocks for income and growth, while the bond holdings seek to deliver income and hedge against volatility. This portfolio’s emphasis on dividend-paying equities and exposure to quality-oriented bonds has helped to reduce the impact of market fluctuations over time.

American Funds Conservative Growth and Income Model Portfolio would have outpaced its index blend

The Conservative Growth and Income accumulation hypothetical begins with an initial investment of $100,000. The gray bars correspond to the American Funds Conservative Growth and Income Model Portfolio index blend and the blue bars correspond to the American Funds Conservative Growth and Income Model Portfolio. The Conservative Growth and Income Index Blend, as of March 31, 2020, is 40% S&P 500, 15% MSCI ACWI ex USA, 30% Bloomberg Barclays U.S. Aggregate and 15% Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped indexes, which is the index blend that the Portfolio Solutions Committee believes most closely approximates the investment universe of the model portfolio. The date range for the ending  scenario is March 31, 2000 to March  31, 2020, for both the index blend and the model portfolio. The gray bar for the ending amount is $271,000 and the blue bar for the ending amount is $345,000, which is 1.3 times the index blend.  For the best scenario, the date range is May 31, 1988 to May 31, 2008, for both the index blend and the Conservative Growth and Income model portfolio. The gray bar corresponds to American Funds Conservative Growth and Income Model Portfolio index blend and the blue bar corresponds to the American Funds Conservative Growth and Income Model Portfolio. The best scenario has $607,000 for the index blend and $719,000 for the model portfolio, which is 1.2 times the index blend. For the median scenario, the date range is August 31, 1989 to August 31, 2009, for the index blend and February 28, 1993 to February 28, 2013, for the Conservative Growth and Income model portfolio. The gray bar corresponds to American Funds Conservative Growth and Income Model Portfolio index blend and the blue bar corresponds to the American Funds Conservative Growth and Income Model portfolio. The median scenario has $432,000 for the index blend and $501,000 for the model portfolio, which is 1.2 times the blend.  For the worst accumulation scenario, the date range is March 31, 2000 to March 31, 2020, for the index blend and December 31, 1998 to December 31, 2018, for the Conservative Growth and Income model portfolio. The gray bar corresponds to American Funds Conservative Growth and Income Model Portfolio index blend and the blue bar corresponds to the American Funds Conservative Growth and Income Model portfolio. The scenario totals $271,000 for the index blend and $340,000 for the model portfolio, which is 1.3 times the blend. The Conservative Growth and Income withdrawal  hypothetical begins with an initial investment of $500,000 at a 4% withdrawal rate. The gray bars correspond to the American Funds Conservative Growth and Income Model Portfolio index blend and the blue bars correspond to the American Funds Conservative Growth and Income Model Portfolio. Total withdrawals are $537,000.  The date range for the ending withdrawal scenario is March 31, 2000 to March  31, 2020, for both the index blend and the model portfolio. The gray bar for the ending amount is $388,000 and the blue bar for the ending amount is $797,000, which is 2.1 times the index blend.  For the best withdrawal scenario, the date range is May 31, 1988 to May 31, 2008, for both the index blend and the Conservative Growth and Income model portfolio. The gray bar corresponds to American Funds Conservative Growth and Income Model Portfolio index blend and the blue bar corresponds to the American Funds Conservative Growth and Income Model portfolio. The best scenario has $1,805,000 for the index blend and $2,200,000 for the model portfolio, which is 1.2 times the index blend. For the median withdrawal scenario, the date range is September 30, 1991 to September 30, 2011, for the index blend and February 28, 1989 to February 28, 2009, for the Conservative Growth and Income model portfolio. The gray bar corresponds to American Funds Conservative Growth and Income Model Portfolio index blend and the blue bar corresponds to the American Funds Conservative Growth and Income Model portfolio.
The underlying fund allocation as of March 31, 2020, in the American Funds Conservative Growth and Income Model Portfolio are American Mutual Fund®, Capital Income Builder®, The Income Fund of America®, American High-Income Trust® and U.S. Government Securities Fund®. Click here for model results and expenses.
Withdrawal scenario based on hypothetical $500,000 initial investments in the model allocation as of March 31, 2020 (Class F-2 shares of the underlying funds) and index portfolio, with monthly withdrawals totaling $20,000 at 4% for the first 12 months, increasing 3% each 12 months thereafter to account for inflation, over rolling 20-year periods since the month-end date following February 19, 1988, the model’s youngest underlying fund, American High-Income Trust’s inception, through March 31, 2020.
As of March 31, 2020, the Conservative Growth and Income Index Blend is 40% S&P 500, 15% MSCI ACWI ex USA, 30% Bloomberg Barclays U.S. Aggregate and 15% Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped indexes, which is the index blend that the Portfolio Solutions Committee believes most closely approximates the investment universe of the model portfolio. The index blend does not specifically represent the benchmarks of the underlying funds in the American Funds model portfolio, which differ. Investors cannot invest directly in an index. There have been periods when the model has lagged the index blend.

What this means

Our funds and portfolio solutions are designed to help you efficiently customize portfolios that align with your clients’ goals, time horizons and risk tolerance.

Opportunistic

Flexibility during times of market volatility can create opportunity

Since the inception of American Funds Strategic Bond Fund® (SBF) in 2016, a hypothetical blended portfolio made up of 60% New Perspective Fund® (NPF) and 40% American Funds Strategic Bond Fund would have outpaced an analogous combination of the 60% S&P 500 and 40% Bloomberg Barclays U.S. Aggregate Index in nearly 75% of rolling 12-month periods. The NPF and SBF combination would have provided 4% and 13% higher ending value versus these index combinations. It's important to note that SBF has only a four-year lifetime, so it hasn't experienced multiple market cycles; however, its flexible investment strategies give the portfolio managers the ability to adjust to evolving market conditions.

A 60/40 combination of New Perspective Fund (NPF) and American Funds Strategic Bond Fund (SBF) outpaced a 60/40 blend of the S&P 500 and Bloomberg Barclays U.S. Aggregate indexes, as well as a 60/40 blend of the MSCI ACWI and Bloomberg Barclays U.S. Aggregate Index

as of 5/31/20
This chart is a line graph showing the hypothetical performance of various portfolios with an initial investment of $100,000 from March 2016 to May 2020. The first hypothetical portfolio is made up of 60% New Perspective Fund and 40% American Funds Strategic Bond Fund. The final gain of that portfolio is $149,819. Compared to that is a hypothetical portfolio made up of 60% S&P 500 Composite Index and 40% Bloomberg Barclays U.S. Aggregate Index, which delivered a final gain of $144,685. The final hypothetical portfolio is made up of 60% MSCI All Country World Index and 40% Bloomberg Barclays U.S. Aggregate Index, which delivered a final gain of $132,291.

Hypothetical portfolio results since SBF's inception on March 8, 2016 through May 31, 2020

Basis points (bps) represent a lead or lag in the American Funds blended hypothetical portfolio vs. blended index hypothetical portfolios
  This chart shows the annualized returns since SBF's inception on March 8, 2016, as well as the standard deviation and Sharpe ratio for a mix of hypothetical portfolios.  The first hypothetical portfolio is made up of 60%  New Perspective Fund and 40% American Funds Strategic Bond Fund. The annualized return over 20 years is 9.98%. The standard deviation is 8.68% and the Sharpe ratio is 0.98.  Compared to that is a hypothetical portfolio made up of 60% S&P 500 Composite Index and 40% Bloomberg Barclays U.S. Aggregate Index, which delivered 9.12% in annualized returns, a standard deviation of 8.84% and Sharpe ratio of 0.86 over a 20-year period.   In another comparison, a hypothetical portfolio made up of 60% MSCI All Country World Index and 40% Bloomberg Barclays U.S. Aggregate Index delivered 6.83% in annualized returns over a 20-year period, a standard deviation of 8.50% and a Sharpe ratio of 0.63.
Annualized standard deviation, based on monthly returns, is a common measure of absolute volatility that tells how returns over time have varied from the mean. A lower number signifies lower volatility.
Sharpe ratios use standard deviation and excess return to determine reward per unit of risk. The higher the number, the better the portfolio's historical risk-adjusted performance.

ANBFX (F-2)

American Funds Strategic Bond Fund

A core plus fund focused on total return consistent with preservation of capital. This strategy seeks higher returns than core bond funds with generally low equity correlation. It aims to drive returns primarily through interest rate, yield curve and inflation positioning, generally resulting in liquid investments with high credit quality. It has the flexibility to invest in extended bond sectors on an opportunistic basis, allowing it to shift credit and duration exposure and pursue opportunities.

ANWFX (F-2)

New Perspective Fund

The fund's investment objective is to provide investors with long-term growth of capital. It seeks to take advantage of evolving global trade patterns by predominantly investing in companies that have potential for growth in capital. Invests primarily in multinational companies with a meaningful share of their sales and operations outside of their home countries. This approach provides the strategy’s portfolio managers with geographic flexibility and the ability to navigate different markets.

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Portfolio Construction Concepts

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.

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. 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.

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.

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.

MSCI has not approved, reviewed or produced this report, makes no express or implied warranties or representations and is not liable whatsoever for any data in the report. You may not redistribute the MSCI data or use it as a basis for other indices or investment products.

Standard & Poor’s 500 Composite Index (“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 is prohibited without written permission of S&P Dow Jones Indices LLC.

©2020 Morningstar, Inc. All rights reserved. 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 nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

Figures shown are past results for Class F-2 shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. 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.

Bloomberg Barclays U.S. Aggregate Index represents the U.S. investment-grade fixed-rate bond market. This index is unmanaged, and its results include reinvested dividend and/or distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or taxes.

Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index measures results of the fixed-rate, non-investment-grade corporate bond market and limits issuer exposure to 2%.

MSCI All Country World Index is a free float-adjusted market capitalization-weighted index that is designed to measure equity market results in the global developed and emerging markets. The index consists of more than 40 developed and emerging market country indexes. This index is unmanaged, and its results include reinvested dividend and/or distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or taxes.

MSCI All Country World ex USA Index is a free float-adjusted market capitalization-weighted index that is designed to measure equity market results in the global developed and emerging markets, excluding the United States. The index consists of more than 40 developed and emerging market country indexes. This index is unmanaged, and its results include reinvested dividend and/or distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or taxes.

Standard & Poor’s 500 Composite Index is a market capitalization-weighted index based on the results of approximately 500 widely held common stocks. This index is unmanaged, and its results include reinvested dividend and/or distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or taxes.

Indexes are unmanaged and do not reflect the effect of sales charges, commissions, account fees, expenses or taxes. Investors cannot invest directly in an index.

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.

All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.

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