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 firms in the world. The best American Funds to hold are some of their oldest mutual funds with proven track records. Their popularity stems from their long history, diverse selection of funds, and below-average expense ratios.

Learn more about American Funds and the top five funds for long-term investors.

Key Takeaways

  • American Funds is a division of one of the world's largest investment management groups; it has more than $2 trillion in managed assets.
  • These five American funds can be ideal for long-term investors. They offer low expense ratios and strong returns over time.
  • These are broker-sold funds, so there are fees unless they’re part of a 401(k) plan.
  • These five best American funds often charge front-load fees of 5.00% to 5.75%, which are manageable if you’re in for the long haul.

What Is American Funds?

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

Note

Key aspects 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 include the following:

  • They are mostly team-managed.
  • They have below-average expense ratios.
  • 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 this in mind, here are some of the best American Funds to consider.

1. American Funds Growth Fund of America: AGTHX

As the name suggests, AGTHX primarily invests in large-cap growth stocks; these could include Amazon (AMZN) and Alphabet (GOOG). AGTHX often holds up to 10% foreign stocks, which may be a pro or con, depending on the performance of foreign stocks compared to U.S. stocks.

AGTHX tends to outperform category averages in the long run, though, especially for periods up to 15 years or more. In the shorter term, AGTHX will likely fluctuate around average, but that is a good quality and typical of an index fund.

2. American Funds Fundamental Investors: ANCFX

This fund invests in a blend of growth and value large-cap stocks. You'll get stock holdings like Microsoft (MSFT) and Facebook (FB). The fund focuses on growth over income and seeks undervalued opportunities. ANCFX's performance fluctuates, but it's still one of the best from American Funds. Ten-year annualized returns average more than 12%.

3. American Funds SMALLCAP World: SMCWX

SMCWX is a World Stock fund, which means that 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 be higher. This is one of American Funds' most research-intensive strategies. It makes use of more than 100 portfolio managers and analysts.

4. American Funds EuroPacific Growth: AEPGX

This fund is one of just a handful of foreign stock funds offered at American Funds. It's also one of their best. AEPGX invests mostly in large-cap stocks outside of the U.S. The managers search for opportunities that could be in markets poised to benefit from innovation, economic growth, increased 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 it consistently provides above-average returns, especially in the long term.

5. American Funds Washington Mutual Investors Fund: AWSHX

This is another large-blend fund like ANCFX. It's a solid long-term performer. The holdings of AWSHX are largely made up of U.S. equities. The fund aims to produce income and provide an opportunity for the growth of principal. Strong balance sheets and consistent dividends are two criteria that the managers screen for. 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 began. 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 often have fees attached to them; this is true unless they are in a 401(k) plan. All five of the above American funds are front-load funds, which means they charge a fee, most often 5.00% to 5.75%, for buying shares.

Note

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 or 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.