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A Fund for Income Seekers

Alec Lucas, Ph.D.

Alec Lucas: Silver-rated American Funds Capital Income Builder (CAIBX) is a strong option to consider for investors who'd like to begin living off of their savings. The fund aims to be an endowment for individuals by investing in a global mixture of stocks and bonds that will produce an above-average and rising income stream. 

As long as interest rates remain low, investors should expect the fund to have a heavy footprint in equities. Indeed, since late 2013, its equity weighting has hovered around 80%, in contrast to its 60% weighting in early 2009. While the fund is more prone to a downturn in the equity market than it has been in the past, it boasts experienced managers who are skilled stock-pickers. 

American's multimanager system of separately run portfolio sleeves allows them to play to their strengths and damps volatility. The fund's conservative bond portfolio also helps in that regard. It has largely avoided junk bonds in recent years and serves primarily as ballast. The fund has a strong long-term track record, and it has consistently delivered a high payout while keeping risk in check.