Is American Funds Global Growth A (PGGAX) a Strong Mutual Fund Pick Right Now?
If investors are looking at the Global – Equity fund category, make sure to pass over American Funds Global Growth A (PGGAX). PGGAX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.
Objective
We note that PGGAX is a Global – Equity option, an investment area loaded with different options. While Global – Equity mutual funds invest their assets in large markets-think the U.S., Europe, and Japan-they aren’t limited by geography. Their investment technique is one that leverages the global economy in order to offer stable returns.
History of Fund/Manager
American Funds is based in Los Angeles, CA, and is the manager of PGGAX. American Funds Global Growth A made its debut in May of 2012, and since then, PGGAX has accumulated about $4.19 billion in assets, per the most up-to-date date available. The fund is currently managed by a team of investment professionals.
Performance
Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 8.58%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 20.95%, 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. Compared to the category average of 10.96%, the standard deviation of PGGAX over the past three years is 12.76%. The standard deviation of the fund over the past 5 years is 15.95% compared to the category average of 12.76%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
Investors should note that the fund has a 5-year beta of 0.99, which means it is hypothetically as volatile as the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio’s performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. Over the past 5 years, the fund has a negative alpha of -4.47. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Expenses
As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, PGGAX is a load fund. It has an expense ratio of 0.35% compared to the category average of 0.93%. PGGAX is actually cheaper than its peers when you consider factors like cost.
This fund requires a minimum initial investment of $250, and each subsequent investment should be at least $50.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, even with its comparatively strong performance, average downside risk, and lower fees, American Funds Global Growth A ( PGGAX ) has a low Zacks Mutual Fund rank, and therefore looks a somewhat weak choice for investors right now.
For additional information on the Global – Equity 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 PGGAX too for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.
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This article originally published on Zacks Investment Research (zacks.com).