7 Best American Funds for Low-Cost Connoisseurs

We dug deep to find the cheapest and best American Funds

Source: Fabian Blank via Unsplash

Yes, it is possible to get the best American funds without paying loads and at lower expense ratios than their most popular share classes. But you’ll need to do some digging to find them. Or you can simply read this story.

American Funds have several different share classes, most of which have limited, or what mutual fund industry people call “qualified,” access. This means American funds are mostly sold through brokers and registered investment advisors. So there’s not much access provided to do-it-yourself investors, at least not to their cheapest shares.

However, there are a few exceptions.

Share classes with the greatest access to all investors include the A Shares and the C Shares. But the former charge front loads and the latter have expensive 12b-1 fees and deferred sales charges, which make both classes a bit pricey for the smart investors looking for the best funds with low expenses.

So with that backdrop, we’ll share the cheapest share classes of the best American funds for mutual fund connoisseurs out there looking for low-cost funds.

Best American Funds: Growth Fund of America Class R6 (RGAGX)

Best American Funds for Low-Cost Connoisseurs: Growth Fund of America (RGAGX)Expenses: 0.33%, or $33 per $10,000 invested annually
Minimum Initial Investment: $250

One of the cheapest and best funds in the American funds lineup is the R6 shares of American Funds The Growth Fund of America Class R-6 (MUTF:RGAGX).

The R shares of American funds are commonly found in retirement plans like 401(k)s (hence the ‘R’ designation) but you won’t find them outside of retirement plans.

If you buy funds through a registered investment advisor, you could possibly get another cheap share class, American Funds The Growth Fund of America Class F-2 (MUTF:GFFFX), for just a bit higher expense at 0.43%.

It’s tough to beat these low expenses for a great actively-managed funds like this. Growth Fund of America has a large-cap growth objective and holds stocks like Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOG,NASDAQ:GOOGL), and Broadcom Ltd (NASDAQ:AVGO).

Best American Funds: American Funds Class R6 (RICGX)

Expenses: 0.30%
Minimum Initial Investment: $250

Investors fortunate enough to have access to American Funds through a 401(k) plan will be happy to have American Funds Investment Company of America® Class R-6 (MUTF:RICGX) as a choice.

The American Funds Investment Company of America® Class R-5E (MUTF:RICHX) has a lower expense ratio (0.05%) than RICGX, but these shares are only available to institutional investors through Fidelity Advisors.

Investment Company of America has historically produced category-busting returns with a portfolio consisting primarily of large-cap stocks like Amgen, Inc. (NASDAQ:AMGN), AbbVie Inc (NYSE:ABBV) and Verizon Communications Inc. (NYSE:VZ).

Best American Funds: American Funds Fundamental Investors R6 (RFNGX)

Expenses: 0.31%
Minimum Initial Investment: $250

If you want to buy low-cost mutual funds and avoid loads, you’ll like American Funds Fundamental Investors R6 (MUTF:RFNGX).

If you’ve already checked out the first two low-cost funds in this article, you may be noticing a trend: The cheapest shares of American Funds available to the most amount of investors are the R shares, which can be purchased through 401(k) plans that offer American Funds.

Fundamental Investors is another outstanding fund in the American Funds lineup and like many of their funds the management has a team structure that consistently leads to above-average performance.

The Fundamental Investors fund has 7 managers and invests in a range of large-cap stocks like Amazon, Microsoft Corporation (NASDAQ:MSFT), and Broadcom, but the fund can also hold non-U.S. stocks.

If you invest through an advisor and want a cheap share class version, ask for American Funds Fundamental Investors Class F-2 (MUTF:FINFX), which has an expense ratio of 0.41%.

Best American Funds: American Funds Smallcap World R6 (RLLGX)

Expenses: 0.71%
Minimum Initial Investment: $250

If you want to buy an aggressive fund that holds international stocks, the best low-cost fund is American Funds Smallcap World Fund Class R-6 (MUTF:RLLGX).

Smallcap World is one of just a handful of mutual funds that focus on small companies from all around the globe. Managers look for high-quality stocks with market caps below $4 billion at the time of purchase.

Top holdings include Domino’s Pizza, Inc. (NYSE:DPZ), Incyte Corporation (NASDAQ:INCY), and Molina Healthcare, Inc. (NYSE:MOH).

The R6 share class at American Funds is consistently the cheapest share class that is accessible to individual investors. However they’re only traded in employer-sponsored retirement plans. If you trade through a fee-only advisor, the best low-cost version is American Funds Smallcap World Fund Class F-2 (MUTF:SMCFX), which has an expense ratio of 0.82%.

Best American Funds: American Funds American Mutual R6 (RMFGX)

Expenses: 0.30%
Minimum Initial Investment: $250

If you are looking for a solid large-cap stock fund that leans to the value side, American Funds American Mutual Fund Class R-6 (MUTF:RMFGX) is the best that American Funds has to offer for frugal investors.

RMFGX is available to investors in certain 401(k) plans and is ideal for those looking for long-term capital appreciation and downside protection during extreme market corrections. The fund’s management team looks for stocks that pay dividends and it avoids tobacco and alcohol stocks.

Top holdings include quality large-caps like Verizon, Amgen, and Texas Instruments Incorporated (NASDAQ:TXN).

If you can’t buy shares of the American Mutual Fund through a 401(k) or other employer-sponsored retirement plan, and you invest through an registered investment advisor, look for the American Funds American Mutual Fund Class F-2 (MUTF:AMRFX), which has an expense ratio of just 0.41%.

Best American Funds: American Funds EuroPacific Growth R6 (RERGX)

Expenses: 0.50%
Minimum Initial Investment: $250

At just 0.50%, you won’t find many low-cost mutual funds focusing on international stocks that beats American Funds EuroPacific Growth Fund Class R-6 (MUTF:RERGX).

Again, we find the lowest expenses for American Funds with their R6 share class, which is offered only through employer-sponsored retirement plans, such as 401(k) plans. So if your employer has access to American Funds, be sure to ask if the R6 shares can be offered in your plan.

The EuroPacific fund is an outstanding international stock fund that focuses primarily on large-cap stocks like Novo Nordisk (NYSE:NVO), HDFC Bank Limited (ADR) (NYSE:HDB), and Novartis AG (ADR) (NYSE:NVS).

As with most other American Funds, the next cheapest share class available to most investors for this fund, especially those buying through a fee-only advisor, is American Funds EuroPacific Growth Fund Class F-2 (MUTF:AEPFX), which has an expense ratio of just 0.60%.

Best American Funds: American Funds American Balanced R6 (RLBGX)

Expenses: 0.29%
Minimum Initial Investment: $250

In terms of balancing risk with reward, you won’t find a better fund in the American Funds lineup than American Funds American Balanced Fund Class R-6 (MUTF:RLBGX).

With a moderate allocation of stocks, bonds and cash, ABALX has put up long-term returns that match those of funds with 100% allocations to stocks, but with less market risk.

And if you can get the R6 shares in a 401(k) plan, you’ll have the cheapest shares of the fund available to non-institutional level investors like you and me.

As with the other funds shared in this gallery of the best and cheapest of American Funds, the next cheapest share class available to investors is American Funds American Balanced Fund Class F-2 (MUTF:AMBFX), which can be had through fee-only investment advisors. The expense ratio for AMGFX is just 0.39%.

As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities. 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.


Article printed from InvestorPlace Media, https://investorplace.com/2016/09/best-american-funds-low-cost-connoisseurs/.

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