The American Funds family of mutual funds is one of the largest of its kind in the world because investors and advisers alike are attracted to the low-cost, high-quality attributes that combine for the best funds to buy.
You’ll especially find American funds in retirement accounts like IRAs and 401(k)s because their portfolio managers’ long-term outlook and dozens of years of experience result in portfolios that are built to last.
Therefore American mutual funds don’t often hit the lists of best short-term performers — they are typically among the best performers for long-term periods, such as over five and 10 years and beyond.
But that’s not to say that you won’t find any American funds beating the market averages over the next 12 months.
With that in mind, here are three of the best American funds to buy in 2016:
Best American Funds for 2016: American Funds Growth Fund of America (AGTHX)
Sales Charge: 5.75%
Expenses: 0.65%, or $65 for every $10,000 invested
Minimum Initial Investment: $250
The same strengths that made American Funds Growth Fund of America (AGTHX) a winner in 2015 will likely make it one of the best funds to buy and hold in 2016.
The two macro-economic trends that are likely to continue for the foreseeable future are rising interest rates and a strong U.S. dollar.
Rising rates can be good for value stocks, but growth stocks perform well in the mid-to late-phase of the business cycle, which is arguably where the market stands now and in 2016. A strong U.S. dollar tends to boost prices for large-cap, international stocks. AGTHX holds both growth and international stocks.
Although the foreign stock is only about 12% of the portfolio, it was enough in 2015 to help give AGTHX an edge over the major market indices. The large-cap domestic stocks include Amazon (AMZN), Gilead Sciences (GILD) and Alphabet Inc (GOOG, GOOGL).
Through Dec. 16, this combination pushed AGTHX to a 2015 gain of 6.4%, which compares to 3.7% on the S&P 500.
Best American Funds for 2016: American Funds Europacific Growth (AEPGX)
Sales Charge: 5.75%
Expenses: 0.83%
Minimum Initial Investment: $250
If you’re looking to add international stocks to your portfolio in 2016, American Funds Europacific Growth (AEPGX) is a solid choice.
Primarily due to a crash in China stocks, 2015 was a rough year for emerging markets, to say the least, while European stocks managed to survive the year with limited damage.
For example, emerging markets stocks, as measured by iShares MSCI Emerging Markets (EEM), were down nearly 17% through mid-December. But AEPGX was just slightly down, 0.9%. And this performance for AEPGX handily beats the MSCI ACWI index, which was down 6.7% for the same period.
2016 is likely to be similar to 2015 and large-cap European stocks — such as AEPGX top holdings Novartis (NVS), Barclays (BCS) and SoftBank Group (SFTBF) — can hold up better than the riskier emerging-markets stocks.
Best American Funds for 2016: American Funds Fundamental Investors (ANCFX)
Sales Charge: 5.75%
Expenses: 0.61%
Minimum Initial Investment: $250
One of the best American funds for 2016 and for the long run is definitely American Funds Fundamental Investors (ANCFX).
The Fundamental Investors fund strikes a good balance of large-cap growth stocks like Amazon, large-cap value stocks like Philip Morris (PM) and stocks like Microsoft (MSFT) that have both growth and value elements.
ANCFX performance looks good in the short term and its long-term historical returns are outstanding. Through mid-December 2015, ANCFX beat over 90% of large blend stock funds with a 3.3% return and the 10-year annualized return of 7.7% also beats more than 90% of category peers.
And with more volatility and downside pressure for major market indices likely in the year to come, ANCFX looks to be one of the best American mutual funds to buy in 2016, and it could be among the best of any mutual fund company.
As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities. However, he holds ANCFX for some client accounts. His No. 1 holding is his privately held investment advisory firm in Hilton Head Island, SC. Under no circumstances does this information represent a recommendation to buy or sell securities.
