The Income Fund of America (AMECX)
You can tell by its name that capital appreciation is an afterthought for American Funds’ Income Fund of America (AMECX).
Around since December 1973, AMECX managed to provide buy-and-hold investors with an average annual return of 11.2% since inception. That’s exceptional when you consider that it’s beaten its category average (according to Morningstar, which gives the Income Fund four stars) by 250 basis points annually over the past five years. Out of a total of 669 funds, AMECX ranks in the top 10%.
Although its mandate is focused on income, AMECX still owns 160 large- and midcap stocks. Its top 10 holdings represent 19% of the portfolio, with names like Merck (MRK), Microsoft (MSFT) and General Electric (GE) rounding out the mix. The fund also may invest up to 25% of the fund’s assets in non-U.S. equities. As of the end of January, AMECX had 22% outside the U.S. in stocks and another 4% in bonds.
Income investors will be happy to know that the fund invests in almost 1,200 bonds producing a 30-day SEC yield of 2.8%, which means the fund achieved almost 15% capital appreciation in 2013. Its only negative year in the past decade was in 2008 when it lost almost 29%, but that still was less than the 37% loss by the S&P 500.
AMECX A shares also charge the initial 5.75% load fee, but regular expenses are just 0.58%. If you’re looking for a good counterbalance to your equity funds, this would be worthy of your consideration.