5 Best American Funds for Long-Term Investors

American Funds Built for Long-Term Performance

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With over 90 years of operation, American Funds is one of the largest mutual fund companies in the world. The best American Funds to hold are some of their oldest mutual funds with established track records. Their popularity stems from their longevity, diverse selection of quality funds, and below-average expense ratios. We'll describe American Funds in more depth and list the top five funds for long-term investors.

Key Takeaways

  • American Funds is a division of one of the largest investment management groups worldwide, with more than $2 trillion in assets under its control.
  • These five American funds can be ideal for long-term investors because they offer low expense ratios and nice returns over time.
  • These are broker-sold funds, so there are fees unless they’re purchased as part of a 401(k) plan.
  • These five best American funds typically charge front-load fees of 5.00% to 5.75%, which is manageable if you’re in this for the long haul.

What Is American Funds?

American Funds is a division of Capital Group, which is one of the largest investment management groups in the world, with over $2 trillion in assets under management. They offer a healthy variety of equity and bond funds that strive for different goals and purposes.

Key characteristics of their funds include being diverse, having a multi-manager structure, featuring "high-conviction" investments, being grounded in fundamental research, and having continuity and consistency in their approach.

The Top 5 American Funds for Long-Term Investors

Some of the best qualities of American funds are that they are mostly team-managed, they have below-average expense ratios, and they often produce above-average returns for periods of 10 to 15 years or more. This makes mutual funds from the American Funds family good investments for long-term investors.

With these qualities in mind, here are some of the best American Funds to consider:

American Funds The Growth Fund of America (AGTHX)

As the name suggests, AGTHX primarily invests in large-cap growth stocks like Amazon (AMZN) and Alphabet (GOOG). However, AGTHX often holds up to 10% foreign stocks, which may be an advantage or disadvantage, depending upon the performance of foreign stocks compared to U.S. stocks. AGTHX does tend to outperform category averages in the long run, though, especially for periods up to 15 years or more. In shorter periods, AGTHX will likely fluctuate around average, but this is a good quality, like that of an index fund.

American Funds Fundamental Investors (ANCFX)

This fund invests in a blend of growth and value large-cap stocks. Therefore you'll get stock holdings like Microsoft (MSFT) and Facebook (FB). The fund strategy focuses on growth over income, seeking undervalued opportunities. Performance for ANCFX does fluctuate but it's one of the best performers at American Funds. Ten-year returns average more than 12%.

American Funds SMALLCAP World (SMCWX)

This fund is a World Stock fund, which means it will invest in U.S. stocks as well as foreign stocks. In fact, the fund's asset mixed is split nearly evenly between the two. SMCWX also concentrates its holdings on small-cap stocks, which adds more market risk compared to large-cap stocks but long-term returns can potentially be higher. This is one of American Funds' most research-intensive strategies and utilizes over 100 portfolio managers and analysts.

American Funds EuroPacific Growth (AEPGX)

This fund is one of just a handful of foreign stock funds offered at American Funds and it's one of their best. AEPGX invests primarily in large-cap stocks outside of the U.S. The managers search for opportunities in markets positioned to benefit from innovation, economic growth, increasing consumer demand, and favorable business conditions. Regional exposure focuses on Asia emerging markets and Europe. AEPGX is another example of American funds that rarely perform at the top of their category but consistently produce above-average returns, especially for long-term periods.

American Funds Washington Mutual Investors Fund (AWSHX)

This is another large-blend fund like ANCFX and it's another in the American Funds lineup that is a solid long-term performer. The holdings of AWSHX are largely composed of U.S. equities, and it aims to produce income and provide an opportunity for growth of principal. Strong balance sheets and consistent dividends are two criteria that the managers screen for in companies. This discipline may be one of the reasons that AWSHX has outpaced its index during every S&P 500 decline of 15% or more since the fund's inception. AWSHX may invest up to 10% of its assets in companies outside the U.S.

The Bottom Line

Mutual funds in the American Funds family are broker-sold funds that typically have fees attached to them unless purchased in a 401(k) plan. All five of the above American funds are front-load funds, which means they charge a fee, usually 5.00% to 5.75%, when buying shares.

American Funds offers other share classes that may waive the load.

After fees, some investors may still find these funds attractive, especially for long-term holding periods.

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.