American Funds Capital Inc Fund

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bb
Posts: 325
Joined: Wed Apr 25, 2007 10:04 pm

American Funds Capital Inc Fund

Post by bb »

Someone I know was discussing purchasing this fund. I am biased toward
index funds. The person was comparing the fund perfomace to the S&P
500 index. I said that was not a fair comparison due to the composition
of the fund. I said a more fair comparison would be to compare to a
mixture of bond index, domestic stock index, and internation equity index.

A true comparison seems difficult because over time the mixture of bonds
and stocks, both foreign and domestic is free to change.

Is there any reasonable comparison to a mixture of index funds to this
fund to get an idea of how it has truly performed?

Looking at 10 yr annulized returns for vanguard total bond, total stock,
and total international funds it would appear in passing the fund has
been a good performer.

Any comments?
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Regal 56
Posts: 464
Joined: Thu May 24, 2007 5:47 pm
Location: South Euclid, OH
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Post by Regal 56 »

As a more fair comparison, this would get you into the ballpark:
80% Vanguard Balanced Index (VBINX)
20% Vanguard Total Intl Stock Index (VGTSX)

Not an exact match to CAIBX, but close enough for a more meaningful comparison. Certainly better than using Vanguard Total Stock Index (VTSMX), since CAIBX is roughly a 60/40 balanced fund. By the way, when comparing indexed versus managed funds, I see no reason to try to match the changing mixtures over time. The crux of the indexing argument is that no one over time can accurately predict the market. So if you try to mimic a managed fund's changing allocations, then you're no longer comparing an index fund to a managed fund. Instead, you're creating a sort of do-it-yourself managed fund, albeit using index funds to create the components.

Is your friend going to have to pay a load for CAIBX? If so, that should also be figured into the comparison.
fredd
Posts: 246
Joined: Sun May 27, 2007 11:43 am

Great Fund with one black eye!

Post by fredd »

Cap Income builder has had a glorious history, except for 2008 when it lost 30%, and an additional 17% up to the market low on 3/9/2009. I was planning on putting some serious money in this fund. I think a similar fund is Wellsley fund, which held up much better during the decline (-12%?). I split my Roth IRA 50-50 Wellington and Wellsley.

fredd
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