I am deciding whether to place $25k that is coming due from a CD soon in either AMECX, CAIBX or a combo of the two.  I currently have $25k in each of AMECX and CAIBX.

The shares would be held in my IRA.  I am in retirement currently (68) and will use the dividends as income and reinvest any capital gains distributions.  I am in fairly good health (expect to live to 80 but probably won't make it to 90). 

If I invested the entire $25k in AMECX at current price (17.96) that would give me 1392 shares.  Their last dividend was 19.5c per share for a dividend of $271.  If I invested the entire $25k in CAIBX at current price (58.1) that would give me 430 shares.  Their last dividend was 52c per share for a dividend of $224.

I have other investments in American Funds and will pay a 1.5% load if I invest in these funds.  I am not concerned about the load so much as current and future income stream and long term capital preservation in light of inflation.

I would like to hear other's thoughts on these two funds compared to each other given that I already have $25k in each fund.  I have other investments but don't want to get into those right now because I have made the decision to go with either all $25k in one of the funds or a combo of the two.  Thanks for any input!

Here is a comparison table of CAIBX & AMECX for the historical distribution of dividends and capital gains for the last 20 years.  Assuming one received and spent all dividends but reinvested all capital gains.  They both look very similar but, if you notice, CAIBX tries harder to grow dividends each year. 

In summary, I would choose CAIBX.

Justin

Another Justin chart!  :-)

Thanks, Justin. I have AMECX (Income Fund of America) available in my 401K. It's the one and only balanced fund in the plan.  I also have CWGIX? (Capital World Growth & Income Fund) 

It's either that, or a bunch of index funds!  I pulled out of the index funds, and I now invest in a combo of the American funds, and the Pimco Total Return fund.

Lucas

Thanks, Justin.  How did you generate that data?  Is there a tool on Morningstar.com to do that?

My concern about using past performance to make this decision is that I think we are in a very unique situation right now with the financial institutions and because I think the recession will spread globally soon if not already.  I am trying to decide if the current market presents a better buying opportunity for one over the other based on the unique situation at hand.  If not, I may just split the $25k between the two.

Hi Lucas,

You have CWGIX in your 401(k)?  VWELX, VWINX, DODBX & CWGIX.  What a nice portfolio!!!!!!!!!!!!!!

KCallie,

You are absolutely right.  I shouldn't drive looking through the rear view mirror. :-)

As I hand calculated these numbers from each fund (data from American Funds website), I tried to "live through" with each one of these funds and I merely meant to say that I would have been more comfortable living through with CAIBX than AMECX.  I was not trying to predict which fund would do better in the future.  I think you have to decide which one or a combo of both. 

Justin 

As I hand calculated these numbers from each fund (data from American Funds website),

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Thank you so much for going to the trouble of hand calculating that information!  It is very helpful!

Justin,

Thanks for the chart...it is quite an elegant work you put up.

CAIBX would be my preference for the questioner...

Wayne.

Hi Lucas,

You have CWGIX in your 401(k)?  VWELX, VWINX, DODBX & CWGIX.  What a nice portfolio!!!!!!!!!!!!!!

Justin

Thank you sir. And since I'm in the "fund collecting mode" again,  I might as well buy the new Dodge & Cox Global fund, too!  :-)))))))  You can never have too many friends.

Lucas

Wayne,

Thanks for your kind words.  I always appreciate your insightful comments regarding American Funds.

Lucas,

I am in your camp.

Wellington, American, D&C, etc.  I think they do a very good job of preventing me from shooting myself in the foot.  :-)

Justin 

CAIBX would be my preference for the questioner...

Wayne.

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 Hi Wayne - any reason for this other than the historical performance of the funds?

[quote user="KCallie"]

My concern about using past performance to make this decision is that I think we are in a very unique situation right now with the financial institutions and because I think the recession will spread globally soon if not already.  I am trying to decide if the current market presents a better buying opportunity for one over the other based on the unique situation at hand.  If not, I may just split the $25k between the two.

[/quote]

To add more details to my comment above, I think that the holdings of AMECX are undervalued right now compared to how I think they will do in the future more so than CAIBX.  AMECX is more weighted toward US equities and mid-quality bonds (many of which are mortgage-backed securities that I think are undervalued now).  Since CAIBX has a greater percentage of its assets in non-US equities and since I think that the US recession will spread globally soon if it hasn’t already, I think some of CAIBX’s non-US holdings may be overvalued compared to how I think they will do in the future.

So I think that AMECX is paying higher current dividends and has the potential for a greater percentage increase in capital appreciation.

I realize that I am guessing here and could be wrong.  What I am most interested in is hearing from anyone who has similar or different thoughts on my guesses about the future performance of these funds.

I have a built a 50/50 mix of amecx and caibx in a retirement account for years. I am a pretty simple basic investor and havent tried to do a lot of analyzing.  Amecx is weighted more in US stocks and Caibx is weighted more toward Foreign.  When foreign markets are strong Caibx leads.  When US markets are strong Amecx will lead. They will zig and zag and you win both ways. Its a great sleep at night mix. You wont shoot the lights out but you will have a nice steady income (when you elect to take it) regardless of NAV fluctuation and nice tax sheltered capital gains to keep your income on a steady rise beating inflation. There isnt much to go wrong with either choice.

Amecx is weighted more in US stocks and Caibx is weighted more toward Foreign.  When foreign markets are strong Caibx leads.  When US markets are strong Amecx will lead.

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Thanks, BigSkyGuy!  I think I will go with AMECX for now as I think US stocks are weak now but will get better in the future.

Hi KCallie,

I like the smoother ride offered by CAIBX as well as its almost predictable consistency in frothy market conditions. AMECX has a higher yield because it has a greater exposure to junk bonds than CAIBX. It is a tad more aggressive as well. One can still sleep well with it anyhow.

That being said, I when I get to retirement would actually use a combo of both funds (hopefully they still exist then and their mandate remains the same!) as I like AMECX.

You can't go wrong with either fund!

I don't know whether you have any but consider adding a slug of the Capital World Bond fund (about 5-7%) to juice things up a little bit. It is nice relatively conservative approach to dabbling in world bond market issues. Its five percent yield does not hurt either.

Check this chart out...(Disclosure: I own some Wellington as a core fund as well as CAIBX..I don't think the chart takes into consideration Cap gains and divvys but it still presents a nice snapshot view of the funds)

http://finance.yahoo.com/q/bc?t=my&s=AMECX&l=on&z=m&q=l&c=vwelx%2Ccaibx%2Ccwbfx 

Wayne.

I don't know whether you have any but consider adding a slug of the Capital World Bond fund (about 5-7%) to juice things up a little bit. It is nice relatively conservative approach to dabbling in world bond market issues. Its five percent yield does not hurt either.

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I currently have about 5% in Capital World Bond Fund and have been happy with the returns so far.  I am thinking about moving out of it, since I have about a 2.5% gain in NAV and I think interest rates will rise soon and that will wipe away my gain.

[quote user="Biggix"]

Check this chart out...(Disclosure: I own some Wellington as a core fund as well as CAIBX..I don't think the chart takes into consideration Cap gains and divvys but it still presents a nice snapshot view of the funds)

http://finance.yahoo.com/q/bc?t=my&s=AMECX&l=on&z=m&q=l&c=vwelx%2Ccaibx%2Ccwbfx 

[/quote]

Thanks!  That is a useful feature I didn't know yahoo had.

Hi Wayne & KCallie,

You need to be especially careful when you use most of the internet comparative multi-year graphing tools as most ONLY reflect NAV and do NOT include distributions from dividends & capital gains as Wayne mentioned, which therefore gives a false presentation of reality! However, I think Fidelity has a tool which does. Try typing in "fund compare" into the search box on Fidelity's website and follow the "fund compare" link, enter the funds to be compared & click "compare" and then "chart view" and see if you get a more realistic historic presentation of the funds you're interesting in!

Best wishes for Safe & Prosperous times!
 

Hi,

This would not be the case as evidenced by the information provided at the start of this thread.

Wayne.

EL Toro II,

Thanks,

Wayne.

You need to be especially careful when you use most of the internet comparative multi-year graphing tools as most ONLY reflect NAV and do NOT include distributions from dividends & capital gains as Wayne mentioned, which therefore gives a false presentation of reality! However, I think Fidelity has a tool which does. Try typing in "fund compare" into the search box on Fidelity's website and follow the "fund compare" link, enter the funds to be compared & click "compare" and then "chart view" and see if you get a more realistic historic presentation of the funds you're interesting in!

Best wishes for Safe & Prosperous times!
 

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Thanks for the tip!