Think No One Can Beat the Index? Think Again | Capital Group


Think No One Can Beat the Index? Think Again

American Funds: An Exception to the Accepted “Rule”

The American Funds have done what skeptics claim is impossible: Beaten their benchmark indexes over the long term. Seventeen of our 18 equity-focused funds, with objectives that include capital preservation, rising income and growth of principal, have generated lifetime index-beating results. The average annualized excess return for the 18 funds was 1.47%. That’s 18 lifetimes — ranging from 82 years to three years — of delivering for investors. Although there have been periods when the funds lagged their indexes, all but one have produced superior lifetime returns.

Returns are average annual total returns for benchmark indexes and average annual excess total return for funds at net asset value from fund inception through 12/31/16. The 18 American Funds equity-focused funds used in our analysis and the relevant index/index blends with which they were compared are as follows: AMCAP, GFA, NEF, AMF, FI, ICA and WMIF (Standard & Poor’s 500 Index); DWGI (MSCI Emerging Markets Index); EUPAC (MSCI All Country World ex USA Index. Prior to 4/1/06, the fund was compared to the MSCI EAFE Index); IGI (MSCI All Country World ex USA Index. Prior to 7/1/10, the fund was compared to the MSCI EAFE Index ); NPF (MSCI All Country World Index. Prior to 10/1/12, the fund was compared to the MSCI World Linked Index) and NWF (MSCI All Country World Index); WGI (MSCI All Country World. Prior to 12/1/11, the fund was compared to the MSCI World Index); SCWF (MSCI ACWI Small Cap Index. Prior to 9/30/08, the fund was compared to the S&P Developed <$1.2 Bil Index Linked Net Index); CIB (70% MSCI All Country World and 30% Bloomberg Barclays U.S. Aggregate indexes. Prior to 11/1/14, the fund was compared to the S&P 500 Index); GBAL (60% MSCI All Country World and 40% Bloomberg Barclays Global Aggregate indexes); and IFA and AMBAL (60% Standard & Poor’s 500 and 40% Bloomberg Barclays U.S. Aggregate indexes). All relevant indexes listed are funds’ primary benchmarks, with the exception of The Income Fund of America (IFA), whose primary benchmark is the S&P 500 index. To provide a more relevant comparison, IFA was compared to a 60% S&P 500 and 40% Bloomberg Barclays U.S. Aggregate blended index, which better reflects its investment universe. IFA’s lifetime return also exceeds the S&P 500 Index.

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.

The S&P indexes are products of S&P Dow Jones Indices LLC and/or its affiliates and have been licensed for use by Capital Group. Copyright © 2017 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.

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. If a sales charge had been deducted, the results would have been lower.

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 or the collective investment trust's Characteristics statement, which can be obtained from a financial professional, Capital or your relationship manager, and should be read carefully before investing. 

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. Small-company stocks entail additional risks, and they can fluctuate in price more than larger company stocks. 

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. 

Securities offered through American Funds Distributors, Inc.

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 not to be comprehensive or to provide advice.