Is American Funds Balanced F1 (BALFX) a Strong Mutual Fund Pick Right Now?

On the lookout for a Allocation Balanced fund? Starting with American Funds Balanced F1 (BALFX) is one possibility. BALFX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

BALFX is classified in the Allocation Balanced segment by Zacks, which is an area full of possibilities. Here, investors are able to get a good head start with diversified mutual funds, and play around with core holding options for a portfolio of funds. Allocation Balanced funds look to invest across a balance of asset types, like stocks, bonds, and cash, though including precious metals or commodities is not unusual; these funds are mostly categorized by their respective asset allocation.

History of Fund/Manager

American Funds is based in Los Angeles, CA, and is the manager of BALFX. American Funds Balanced F1 made its debut in July of 1975, and since then, BALFX has accumulated about $4.60 billion in assets, per the most up-to-date date available. A team of investment professionals is the fund's current manager.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of 9.74%, and is 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 16.31%, which places it in the top 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 10.45%, the standard deviation of BALFX over the past three years is 7.81%. The fund's standard deviation over the past 5 years is 10.2% compared to the category average of 12.42%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

With a 5-year beta of 0.65, the fund is likely to be less volatile than the market average. 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. BALFX has generated a negative alpha over the past five years of -0.71, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, BALFX is a no load fund. It has an expense ratio of 0.61% compared to the category average of 0.93%. From a cost perspective, BALFX is actually cheaper than its peers.

While the minimum initial investment for the product is $250, investors should also note that each subsequent investment needs to be at least $50.

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

Bottom Line

Overall, American Funds Balanced F1 ( BALFX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

This could just be the start of your research on BALFX in the Allocation Balanced category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.

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This article originally published on Zacks Investment Research (zacks.com).

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