Five American Funds Disprove the Index Myth | Capital Group

Myth: You Can't Beat the Index Over the Long-Term

All Five U.S.-Focused American Funds stock funds available when the first index fund ― The Vanguard 500 Index Fund ― launched have beaten its lifetime result.

The Potential for Greater Wealth

As you can see, an investment manager with a proven track record of outpacing the market can produce significantly greater wealth than an index investment.

A comparison of the lifetime results of the first index fund to the results of five American Funds over that same period illustrates our advantage. Those funds are AMCAP Fund, American Mutual Fund, The Growth Fund of America, The Investment Company of America and Washington Mutual Investors Fund. The comparison is especially apt as that index fund was designed to track the S&P 500, which is also the benchmark for the five American Funds which seek to pursue investment objectives such as growth, income or preservation of capital. Watch and see how the American Funds fared since the index fund’s inception — from August 31, 1976, through June 30, 2018:

 

Figures shown are past results for Class A shares for American Funds (Investor shares for Vanguard 500 Index Fund) 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. Unless otherwise indicated, American Funds returns are shown at maximum offering price (MOP) and reflect deduction of the 5.75% maximum sales charge at the beginning of the period shown. Thus, the net amount invested was $9,425 ($1,885/per fund in the American Funds Blend scenario). The maximum initial sales charge
 was 8.50% prior to July 1, 1988. All distributions were reinvested. The Vanguard fund has no up-front sales charge and is available in another share class with a lower expense ratio. This share class was not available for investment at the inception of the fund. The American Funds are now also available in less expensive share classes that do not feature a sales charge. Current information and month-end results for the Vanguard fund can be found at vanguard.com. For current information and month-end results for the American Funds, visit americanfunds.com.

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1 Figures shown are for the period August 31, 1976, the inception date of the first index fund, through June 30, 2018. Standard deviation is a measure of how returns over time have varied from the mean and is one of the most common measures of absolute volatility. A lower number signifies lower volatility.

2 The Vanguard 500 Index Fund has no up-front sales charge.

3 Portfolio turnover for the Vanguard Fund is as of December 31, 2017.

Investment results assume all distributions are reinvested and reflect applicable fees and expenses. Expense ratios are as of each fund’s prospectus available at time of publication. When applicable, investment results reflect fee waivers and/or expense reimbursements, without which results would have been lower. Please see americanfunds.com for more information. Source for industry average expense ratios is Lipper, based on comparable categories for front-end load funds (except for the Vanguard fund, which is no load, not front-end load), excluding funds of funds, as of each fund’s most recent fiscal year-end available as of June 30, 2018. The Lipper categories for the funds are: AMCAP Fund (Growth); The Growth Fund of America (Large-Cap Growth); The Investment Company of America, Washington Mutual Investors Fund and American Mutual Fund (Growth & Income); and Vanguard 500 Index Fund (S&P 500 Index Objective Funds).

Content contained herein is not intended to serve as impartial investment or fiduciary advice. The content has been developed by Capital Group which receives fees for managing, distributing and/or servicing its investments.

©2018 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. These numbers were calculated by the Capital Group based on underlying Morningstar data.


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. 

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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.