Is American Funds Capital Income Builder A (CAIBX) a Strong Mutual Fund Pick Right Now?
Having trouble finding a Large Cap Blend fund? American Funds Capital Income Builder A (CAIBX) is a potential starting point. CAIBX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
CAIBX is part of the Large Cap Blend section, an area that boasts an array of many possible options. Large Cap Blend mutual funds most often invest in firms with a market capitalization of $10 billion or more. By investing in bigger companies, these funds offer more stability, and are often well-suited for investors with a ‘buy and hold’ mindset. Blended funds mix large, established companies into their holdings, which gives investors exposure to both value and growth at the same time.
History of Fund/Manager
CAIBX is a part of the American Funds family of funds, a company based out of Los Angeles, CA. American Funds Capital Income Builder A made its debut in July of 1987, and since then, CAIBX has accumulated about $70.08 billion in assets, per the most up-to-date date available. A team of investment professionals is the fund’s current manager.
Performance
Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 8.66%, and is in the top third among its category peers. If you’re interested in shorter time frames, do not dismiss looking at the fund’s 3-year annualized total return of 15.93%, which places it in the top third during this time-frame.
It is important to note that the product’s returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund’s [%] sale charge. If sales charges were included, total returns would have been lower.
When looking at a fund’s performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. The standard deviation of CAIBX over the past three years is 8.27% compared to the category average of 10.95%. Over the past 5 years, the standard deviation of the fund is 10.56% compared to the category average of 12.75%. This makes the fund less volatile than its peers over the past half-decade.
Risk Factors
Investors should not forget about beta, an important way to measure a mutual fund’s risk compared to the market as a whole. CAIBX has a 5-year beta of 0.55, which means it is likely to be less volatile than the market average. Another factor to consider is alpha, as it reflects a portfolio’s performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. With a negative alpha of -0.41, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Expenses
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, CAIBX is a load fund. It has an expense ratio of 0.57% compared to the category average of 0.92%. CAIBX is actually cheaper than its peers when you consider factors like cost.
Investors should also note that the minimum initial investment for the product is $250 and that each subsequent investment needs to be at $50.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, American Funds Capital Income Builder A ( CAIBX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.
For additional information on the Large Cap Blend area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into CAIBX too for additional information. Zacks provides a full suite of tools to help you analyze your portfolio – both funds and stocks – in the most efficient way possible.
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This article originally published on Zacks Investment Research (zacks.com).