Fund Authority Scores rate mutual funds and exchange traded funds (ETFs) on the most important economic factors that influence individual investors’ net long term diversified investment fund performance. The Skilled Investor developed the Fund Authority Score system to provide individual investors with concise and objective summaries of mutual funds and ETFs for comparisons within investment asset classes.
For a directory of the Fund Authority Score reports of other mutual funds and ETFs, go here. When you go to this Fund Authority Score directory, you can easily find a list of all fund reports at the bottom of each article for that particular investment asset class. For more information about how a Fund Authority Score is developed for each mutual fund or ETF, go here.
The diversified investment fund strategy of the Income Fund of America mutual fund
At approximately $91 billion in assets with 2.2 million shareholder accounts, the Income Fund of America is a very large actively managed mutual fund. This fund can invest worldwide, however it focuses largely on U.S. equity and debt securities. Recently, 20% of this mutual fund’s portfolio assets were invested in non-U.S. equities and 4% of portfolio assets were invested in non-U.S. bonds.
According to the American Funds mutual fund prospectus for the Income Fund of America, this mutual fund “seeks to provide you with current income and, secondarily, to make your investment grow. It invests primarily in a broad range of income-producing securities, including stocks and bonds. Generally, the fund will invest a substantial portion of its assets in equity-type securities.”
The statement of its investment limitations and guidelines in its recent 497 filing on the U.S. Securities and Exchange Commission’s EDGAR system indicates that “under normal circumstances…” the Income Fund of America “…will invest at least 65% of its assets in income-producing securities.” The fund will normally invest 60% or more of portfolio assets in stocks.
Under its investment guidelines, this fund can invest as much as 20% of its portfolio in non-convertible debt instruments that have a Standard & Poor’s Corporation rating of BB or lower or the equivalent ratings by the Moody’s Investors Service.
No more than 25% of the portfolio would normally be invested in the stocks “of issuers domiciled outside the United States and not included in the S&P 500 Composite Index.” Given this relatively low upper limitation for non-U.S. stocks and the fund’s recent 20% weighting in non-U.S. equities, we have classified this mutual fund as a U.S. large capitalization mutual fund rather than as a worldwide stock mutual fund. As much as 10% of the investment portfolio can also be invested in the U.S. dollar denominated debt instruments of non-U.S. issuers.
The Income Fund of America has a variety of share classes which can only be purchased through an advisor or other financial intermediary – not directly.
The Fund Authority Score for the American Funds’ Income Fund of America mutual fund – Class A Shares
The table below presents the Fund Authority Score and other information for the Income Fund of America mutual fund.
Using an integer scale ranging from -10 to +10, Fund Authority Scores measure five factors:
1) annualized management and investment sales expenses (40% weighting),
2) annual trading costs implied by investment fund portfolio turnover (30% weighting),
3) inferior and superior historical performance (20% weighting),
4) minimum fund maturity (5% weighting), and
5) minimum fund size for operating efficiency (5% weighting).
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NOTES:
— Most mutual funds and ETFs change their fees and trading strategies relatively little over time. Because investment expenses, trading/turnover costs, fund maturity, and operating efficiency account for 80% of the Fund Authority Score rating system, Fund Authority Scores tend to remain relatively stable over time for such consistent investment funds.
— The date in the table above indicates when fund information was accessed from SEC EDGAR filings and/or the fund company website. Normally, data used to develop Fund Authority Scores rely upon reporting periods ending the previous calendar quarter or half year.
— Unless otherwise stated, there are no business arrangements of any kind between The Skilled Investor and any financial product, service, or company that may be discussed in our publication’s articles.
— Fund Authority Scores are developed on a fund by fund basis. Just because a mutual fund or ETF has a high Fund Authority Score does not mean that other funds from that fund family do, as well. On your own, always be careful to check current management expenses, sales loads, portfolio turnover, fund maturity, fund size, fund performance, and other current factors before investing in any diversified investment fund.
— If you do not need and/or are unwilling to pay the direct and indirect costs of an investment counselor, stock broker, or other financial advisory intermediary, you should note that many mutual funds can be purchased directly from diversified investment fund families by accessing their websites or by calling their customer service telephone numbers. Similarly many ETFs can be purchased with lower transactions fees through discount brokers. (See these articles: Payment of Investment Advisors, Financial Planners, and Investment Counselors)
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