Is American Funds Growth Fund of America R6 (RGAGX) a Strong Mutual Fund Pick Right Now?

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If you’ve been stuck searching for Large Cap Growth funds, consider American Funds Growth Fund of America R6 (RGAGX) as a possibility. RGAGX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

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Objective

We classify RGAGX in the Large Cap Growth category, an area rife with potential choices. Large Cap Growth funds invest in many large U.S. companies that are expected to grow much faster compared to other large-cap stocks. To be considered large-cap, companies must have a market cap over $10 billion.

History of Fund/Manager

RGAGX finds itself in the American Funds family, based out of Los Angeles, CA. The American Funds Growth Fund of America R6 made its debut in May of 2009 and RGAGX has managed to accumulate roughly $38.57 billion in assets, as of the most recently available information. The fund is currently managed by a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. RGAGX has a 5-year annualized total return of 20.16% and is in the middle third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 19.89%, which places it in the middle third during this time-frame.

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 15.19%, the standard deviation of RGAGX over the past three years is 19.14%. Over the past 5 years, the standard deviation of the fund is 15.61% compared to the category average of 12.77%. 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 1, 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. RGAGX’s 5-year performance has produced a positive alpha of 3.44, which means managers in this portfolio are skilled in picking 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, RGAGX is a no load fund. It has an expense ratio of 0.30% compared to the category average of 1.03%. From a cost perspective, RGAGX is actually cheaper than its peers.

While the minimum initial investment for the product is $250, investors should also note that each subsequent investment needs to be at least $50.

Bottom Line

Overall, American Funds Growth Fund of America R6 ( RGAGX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Large Cap Growth, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.

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