There are plenty of choices in the Mutual Fund Equity Report category, but where should you start your research? Well, one fund that may not be worth investigating is American Funds Capital Income Builder A (CAIBX). CAIBX carries a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.
History of Fund/Manager
American Funds is based in Los Angeles, CA, and is the manager of CAIBX. American Funds Capital Income Builder A debuted in July of 1987. Since then, CAIBX has accumulated assets of about $58.33 billion, according to 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. This fund carries a 5-year annualized total return of 3.91%, 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 5.21%, which places it in the top 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. CAIBX’s standard deviation over the past three years is 13.97% compared to the category average of 17.23%. Over the past 5 years, the standard deviation of the fund is 11.97% compared to the category average of 14.97%. This makes the fund less volatile than its peers over the past half-decade.
Risk Factors
The fund has a 5-year beta of 0.59, so investors should note that it is hypothetically less volatile than the market at large. Because alpha represents a portfolio’s performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. CAIBX has generated a negative alpha over the past five years of -2.5, demonstrating 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, CAIBX is a load fund. It has an expense ratio of 0.59% compared to the category average of 0.91%. So, CAIBX is actually cheaper than its peers from a cost perspective.
Investors should also note that the minimum initial investment for the product is $250 and that each subsequent investment needs to be at $50.
Bottom Line
Overall, American Funds Capital Income Builder A ( CAIBX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Mutual Fund Equity Report, 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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