Is ‘Bigger’ ‘Better’ When It Comes To Mutual Funds?

If you thought that Magellan was a behemoth of a mutual fund, think again. It just got dwarfed by the mother of all funds, American Funds Growth Fund of America, which weighs in at a hefty $165 billion in assets.

Normally, I wouldn’t even pay attention to this fund, since it has a front load of 5.75%, but an article at Motley Fool’s website made me wonder if this bloated condition might have an adverse effect on performance.

The article cites a number of amazing stats showing that this fund actually outperformed the S&P; 500 over a longer term basis. I did a quick 5-year comparison in the chart below and confirmed the findings.

Of course, the fund hasn’t always been this large, so looking at its past may not be as accurate for the present. Only time will tell.

What tickles me though is that there is currently a big debate going on as to the benefits of indexing vs. the use of actively managed mutual funds. This article sure is a feather in the cap for the folks who promote the actively managed funds, although the index people are trying very hard to come out on top.

I can tell you already that neither one is right, but I will be weighing in with more detailed opinions in future posts after finishing Larry Swedroe’s book on the subject.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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