Funds

Is American Funds SMALLCAP World A (SMCWX) a Strong Mutual Fund Pick Right Now?


If you have been looking for Mutual Fund Equity Report funds, it would not be wise to start your search with American Funds SMALLCAP World A (SMCWX). SMCWX has 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

SMCWX finds itself in the American Funds family, based out of Los Angeles, CA. American Funds SMALLCAP World A debuted in April of 1990. Since then, SMCWX has accumulated assets of about $26.20 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. SMCWX has a 5-year annualized total return of 6.94% and it sits in the middle third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of -2.71%, which places it in the bottom third during this time-frame.

It is important to note that the product’s returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund’s [%] sale charge. If sales charges were included, total returns would have been lower.

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. Compared to the category average of 15%, the standard deviation of SMCWX over the past three years is 19.77%. Over the past 5 years, the standard deviation of the fund is 21.53% compared to the category average of 15.65%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 1.03, which means it is hypothetically as volatile as the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio’s performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. SMCWX’s 5-year performance has produced a negative alpha of -4.82, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, SMCWX is a load fund. It has an expense ratio of 1.05% compared to the category average of 0.98%. So, SMCWX is actually more expensive 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

Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.

Bottom Line

Overall, American Funds SMALLCAP World A ( SMCWX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, worse downside risk, and higher fees, American Funds SMALLCAP World A ( SMCWX ) looks like a somewhat weak choice for investors right now.

For additional information on the Mutual Fund Equity Report area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into SMCWX too 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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