american funds vs vanguard indexes over time?
December 18, 2009 by
Filed under american funds ira
i have most of my mutual ira funds through american funds. my question is that over the period of 30 years, contributing 5k a year i would pay about $8600 just in loads to get into these funds. is it possible that these could outperform a variety of vanguard index funds even after paying the loads over 30 years? (generally af expenses are about .70% vs vanguard .20%).
would it be wise to continue to contribute to american funds based on year after year compounding at 5k a year, or open a 2nd portfolio of vanguard index funds and contribute $2500 to the american funds ira funds and $2500 to the vanguard ira funds each year? i wasnt sure if that would be he best move since i may lose on the amount of compounding but cut the amount of the loads in half over 30 years (approx $4300 instad)
good info..and again, i have about 15k or so already in american funds, a decent start to continue the compounding process..otherwise if i just leave them be and start fresh at a different no-load company, i am not sure if that would be the best move because i am not adding the current 15k to it (it is an ira with B shares, so they need to stay put). any added input?
American Funds are great funds. The internal fees are fair. To compare this to index funds is not fair. I like managed mutual funds over index funds any day of the week.
So….. find some good no load, low fee Mutual Funds & you’ll get better returns just based on not paying the 5.75% load.
There are many great fund companies without sales charges;
T Rowe Price
Dodge & Cox
and a few hundred more…….
Pay sales charges is just…. very costly.
Read;
Mutual Fund For Dummies
American funds are well thought of, in the mutual fund world. The people that invest in them love them.
But speaking for myself, I would rather go with a no load alternative @ Vanguard, Fidelity and/or TRowe Price.
I personally own American Funds and have for many years. I think if you compare the long term results VS most NO-Load funds certainly comparing proper peer funds American Funds will do better. If you compare over shorter periods, of course the No-Load fund wins. When I say shorter periods 5 years possibly 10.
I noticed one of the posters said American charges a 5.75% Load, yes and no. This is the load for the first 25,000 your sales charge lowers as you invest more money with any loaded fund. Amounts over 1-m you pay no front end load.
If you get hung up on front end loads you miss longterm results, which should be of equal consideration. Who cares if a fund charges me 5.75% if the results are better than a no- load fund over longer periods you’ll do better with the actively managed fund, possibly. Just because it’s a no-load doesn’t mean your better off.
I think Vanguard is a great shop, but you still need to do your homework when it comes to investing. I choose American Funds because I believe in the company philosophy, there’s a great book about American Funds, titled “Capital” since they don’t advertise or allow fund managers to conduct media interviews, this is really a good read about a very quiet company by Charles Ellis, who by the way had a difficult time being granted interviews…Vanguard VS American Funds? I don’t know but if you go on the FINRA web site you can compare all funds by expenses and results, results can be as or more important, my Dad always said you get what you pay for…
Lastly, always look at the annual expense ratio, every fund has it No load or Loaded funds, my experience is that American Funds keeps this expense lower compared to their peers. This expense never goes away…Of course Vanguard is always the winner in this category, be sure you look at long term results….
Lastly, Lastly some people just hate to pay for anything, no matter what so be careful when asking this question… Bottom line do your homework! Read everything, then make your decision,see you in the long run…