ABALX
American Funds American Balanced-A
A Balanced Approach to Growth and Income
The American Funds American Balanced-A (ABALX) is designed to provide investors with a balanced approach to capital conservation, current income, and long-term growth. This fund achieves its objectives by investing in a diverse range of securities, including common stocks and investment-grade bonds. Additionally, it includes securities issued and guaranteed by the U.S. government, offering a layer of security and stability. The fund’s balanced nature makes it an attractive option for investors seeking a moderate-risk investment that can deliver both growth and income over time.
At A Glance
Executive Summary
ABALX offers a balanced approach with a 0.57% expense ratio, focusing on growth and income through diversified stock and bond investments.
Diversified portfolio with stocks and bonds Moderate risk with potential for growth Strong historical performance
Higher expense ratio than some peers Lower yield compared to similar funds Negative alpha indicating underperformance
Sector Allocation: A Technology-Heavy Portfolio
ABALX’s sector allocation reveals a significant emphasis on technology, which constitutes 25.37% of the portfolio. This heavy investment in technology stocks suggests a strategic focus on sectors with high growth potential. Other notable sectors include health care at 13.16% and financials at 12.53%, providing a diversified exposure across industries. The fund’s allocation to defensive sectors like utilities and real estate is relatively low, indicating a preference for sectors that can drive growth. This sector allocation strategy aligns with the fund’s objective of achieving long-term growth while maintaining a balanced risk profile.
Top Holdings: A Blend of Cash and Tech Giants
The top holdings of ABALX include a mix of cash and leading technology companies. The Capital Group Central Cash Fund holds the largest position at 6.14%, providing liquidity and stability. Notable tech giants such as Broadcom Inc (4.68%), Microsoft Corp (3.45%), and Meta Platforms Inc (2.08%) are also among the top holdings, reflecting the fund’s focus on high-growth technology stocks. This blend of cash and equities helps balance the portfolio, offering both stability and growth potential. The presence of well-established companies like UnitedHealth Group and Philip Morris International further diversifies the fund’s holdings.
Performance Metrics: Navigating Market Volatility
ABALX has demonstrated resilience in navigating market volatility, as evidenced by its performance metrics. The fund’s beta of 0.65 indicates lower volatility compared to the benchmark S&P 500 Total Return Index, which has a beta of 1.00. Despite a negative alpha of -13.01%, suggesting underperformance relative to the benchmark, the fund’s standard deviation of 2.45% reflects a stable performance. The Sharpe Ratio of -1.53 and Treynor Ratio of -19.95 highlight the challenges faced in achieving risk-adjusted returns. However, the fund’s ability to maintain a max drawdown of only -4.6% demonstrates its capacity to protect capital during downturns.
Comparative Analysis: Expense Ratio and Yield
When compared to similar funds, ABALX’s expense ratio of 0.57% is higher than some peers, such as JPMorgan Investor Growth & Income-A (0.55%) and Janus Henderson Balanced-A (0.89%). Despite this, ABALX offers a competitive yield of 1.17%, although it is lower than BlackRock Sustain Balanced-InvA’s yield of 3.02%. Investors should weigh the higher expense ratio against the fund’s diversified portfolio and historical performance. The fund’s focus on both growth and income makes it a viable option for those seeking a balanced investment strategy, despite the slightly higher costs.
Asset Allocation: A Focus on U.S. Equities
ABALX’s asset allocation is heavily weighted towards U.S. equities, which make up 55.84% of the portfolio. This focus on domestic stocks aligns with the fund’s strategy to capitalize on the growth potential of the U.S. market. Bonds account for 28.80% of the portfolio, providing a stable income stream and reducing overall volatility. The fund also includes a small allocation to non-U.S. equities (7.95%) and cash (4.39%), offering additional diversification. This asset allocation strategy supports the fund’s objective of achieving a balanced mix of growth and income, catering to investors seeking a moderate-risk investment.
Risk and Return: Balancing Potential and Stability
ABALX’s risk metrics highlight the fund’s approach to balancing potential returns with stability. The fund’s downside risk, measured by a downside risk (UI) of 1.22, indicates a relatively low risk of significant losses. However, the negative upside potential of -10.65 suggests limited opportunities for substantial gains. The fund’s R-squared value of 89.63% indicates a strong correlation with the benchmark, reflecting its alignment with market movements. Despite these challenges, the fund’s historical returns, such as a 24.65% one-year return, demonstrate its ability to deliver competitive performance, making it suitable for investors seeking a balanced risk-reward profile.
Conclusion: A Suitable Choice for Moderate-Risk Investors
In conclusion, the American Funds American Balanced-A (ABALX) stands out as a suitable choice for investors seeking a balanced approach to growth and income. Its diversified portfolio, with a significant allocation to technology and U.S. equities, offers potential for long-term growth. While the fund’s expense ratio is higher than some peers, its historical performance and ability to navigate market volatility make it an attractive option for moderate-risk investors. Those looking for a fund that balances growth potential with income generation will find ABALX to be a compelling addition to their investment portfolio.
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Futher Reading
https://finance.yahoo.com/quote/ABALX/”>Yahoo: American Funds American Balanced-A
https://ftcloud.fasttrack.net/web/chart/ABALX
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