Flexibility Pays Off for This Large-Growth Fund
Gold-rated American Funds New Economy's freedom to invest in mid-cap and foreign stocks has been an asset for fundholders over the long term.
Gold-rated American Funds New Economy's freedom to invest in mid-cap and foreign stocks has been an asset for fundholders over the long term.
Alec Lucas: American Funds New Economy (ANEFX) takes an effective approach to growth investing. Founded in 1983, the fund initially aimed to capitalize on a shift from a manufacturing-dominated economy to one based on services and information companies.
The fund's focus has broadened over the years, and it now concentrates on firms driving or benefiting from innovation. It's also one of the most flexible offerings in the large-growth category. The fund's freedom to invest in mid-cap stocks and below has historically led it to have one of the category's smallest average market caps. The fund can also invest up to 45% of its assets in non-U.S. companies, including a sizable chunk in emerging-markets stocks.
The managers take advantage of that flexibility, and the fund has often been one of the category's leaders in both respects. Relatively heavy emerging-markets exposure and foreign developed exposure can cause the fund to lag at times over the short term, as it has this year. Over the long term, though, the fund's global makeup has been an asset. Its trailing 10- and 15-year returns through late October 2014 are both first quartile.
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