American Funds vs Fidelity, Vanguard, TD Ameritrade, Etrade, Charles Schwab, and Ally Invest


American Funds vs Fidelity and Other Competitors: Pricing


Broker Fees Stock/ETF
Commission
Mutual Fund
Commission
Options
Commission
Maintenance
Fee
Annual IRA
Fee
TD Ameritrade $6.95 $49.95 $6.95 + $0.75 per contract $0 $0
Ally Invest $4.95 $9.95 $4.95 + $0.65 per contract $0 $0
Fidelity $4.95 $49.95 $4.95 + $0.65 per contract $0 $0
Charles Schwab $4.95 $76 ($0 to sell) $4.95 + $0.65 per contract $0 $0
Etrade $6.95 $19.95 $6.95 + $0.75 per contract $0 $0
Vanguard $7-$20 $8-$35 $20 + $1.00 per contract $20* see


American Funds vs Vanguard and Others: Services


Broker Review Cost Investment Products Trading Tools Customer Service Research Overall Rating
TD Ameritrade
Ally Invest
Fidelity
Charles Schwab
Etrade
Vanguard
American Funds


Compare American Funds vs Competitors


American Funds is a family of 33 mutual funds managed by Capital Research and Management. The company does not advertise and shuns publicity, preferring to rely on brokers' recommendations to their clients. With over $1 trillion in assets under management, American Funds is the third largest mutual funds provider behind Fidelity Investments and Vanguard Group.

TD Ameritrade, Etrade, and Charles Schwab are the household names, the largest discount brokerage houses in the U.S. The companies are very popular among all investors - from beginners to institutions.


Pricing

American Funds has an upfront percentage sales charge for certain share classes. If you are interested in buying class “A“ shares, the sales charge will be:

  • $25,000 to $50,000 - 5%
  • $50,000 to $100,000 - 4.5%
  • $100,000 to $250,000 - 3.5%
  • The sales charge will decrease by one percentage point for every two hundred and fifty thousand buys of shares thereafter

Fidelity Investments, Charles Schwab and Ally Invest are charging $4.95 per trade commission for stocks and ETFs, which is below the average in the industry. Other firms have higher equities pricing.

Ally Invest is, again, the cheapest for mutual fund investors: just $10 per transaction for transaction-fee, no-load mutual funds. Etrade charges $20 per transaction. Other companies have much higher rates: from $50 to $76 for the same trades. Investors can buy American Funds, Fidelity and Vanguard mutual funds with all American Funds' competitors in this article.

There are thousands of commission-free (NTF program) mutual funds to choose from at the six discount brokerage firms (but not at American Funds). Keep in mind, that Fidelity Investments is charging a $75 short-term redemption fee for mutual funds sold less than 180 days after being purchased. There is also a $12 annual Low Balance Fee for any non-core Fidelity fund with balance under $2,000.


Promotions

Ally Invest: Up to $3,500 cash bonus + commission free trades for new accounts.

TD Ameritrade: Trade free for 60 days + get up to $600.

Charles Schwab: Make $100,000 deposit and get 500 commission-free online equity and options trades.

Fidelity Investments: Get 500 free trades with $100,000+ deposit.

ETRADE: At E*TRADE, get $6.95 trades + 65₵ per options contract.

Vanguard and American Funds: None


Services

TD Ameritrade and Ally Invest offer their customers access to online investors communities, where users can see what other, more advanced members invest in or trade, create and follow other member's blogs, interact with like-minded individuals. Ally Invest actually pioneered this feature in brokerage industry and its community is currently among the best.

TD Ameritrade and Ally Invest are the best ranking firms in customer service. Ally Invest was rated #1 in Customer Service by Kiplinger's magazine for the four years in the row. Fidelity Investments and Charles Schwab also got very high ratings in this category.

All the companies in this review (except Vanguard and American Funds) created easy-to-use, powerful trading tools that will satisfy just about everyone. But only TD Ameritrade offers professional trading platform (ThinkOrSwim) that is a must-have for very active traders as well as for forex and futures trading.

Because TD Ameritrade and Ally Invest created well-designed, intuitive trading screens, offer access to helpful online communities, and provide award-winning customer service, we rated them the Best Online Brokers for Beginners.


Our Recommendations

Beginner Investors: we recommend Ally Invest and TD Ameritrade.

IRA accounts: TD Ameritrade, Charles Schwab, Fidelity Investments, and Etrade.

Stocks/ETFs Traders: Ally Invest, TD Ameritrade, and Fidelity Investments.

Options Traders: Ally Invest.

Long Term, Inactive Investors: TD Ameritrade, Charles Schwab, Fidelity Investments, and Etrade.

Mutual Funds Investors: Ally Invest and TD Ameritrade. Fidelity Investments, American Funds and Vanguard if investing mostly in their own families of mutual funds.

Small accounts: TD Ameritrade and Ally Invest.


American Funds by Capital Group Review


This article will discuss general performance of American Funds products. For the list of the firm's top performing funds go to Best American Funds mutual funds article.

In the volatile world of retirement investing, IRA investors often rely on long-term performance to determine the framework of their portfolio. Those seeking long-term growth in their portfolios look to established fund management groups. American Funds has proven to be the answer in the growth sector. Founded in 1931 by Jonathan Bell Lovelace, American Funds has shown to be well above average throughout its life, as multiple funds have posted over 11% lifetime return. With such a pedigree, it is no surprise they are able to bring in some of the best financial management minds in the world. What is even more impressive is that their managers rarely leave. Managers of the AMCAP Fund, a large equity fund offered by American Funds, average over 25 years of tenure with the group. These managers utilize this expertise to build upon the legacy that started 85 years ago. Millions of investors have made the fund manager a staple in their portfolios due to this knowledge advantage.


American Funds Performance


The risky nature of mutual funds often deter investors from taking the leap. The longer the track record of a fund, however, the less risk involved. This is where American Funds shines. The Growth Fund of America has an average return of 13.2% since its conception in 1973. It is a very large family of funds, ranked by Morningstar among the three biggest (joined by Fidelity Investments and Vanguard Group). American Funds’ large equity funds contain nearly half of their assets in the technology and healthcare sectors. It also invests at least 10% of its assets in its top-5 holdings within funds. These top holdings include major corporations such as Oracle Corp, UnitedHealth Group Inc., Netflix, and many more.


American Funds 10-Year Struggle


Although American Funds has a strong track record, the past three, five, and 10-year returns have failed in outpacing even the S&P 500 Composite Index. This has caused great skepticism among financial experts and has made it difficult for investors to justify the high front-load expenses.


Recent Shift in Momentum


In contrast to the recent lackluster performance of the funds, Janet Levaux of ThinkAdvisor published an article in May by citing Morningstar’s fund flow reports. The report indicated American Funds had surpassed Fidelity Investments as the second largest fund family. While Vanguard has a comfortable lead, American Funds’ $5.8 billion increase in 2018 combined with Fidelity’s free-fall of $28.5 billion has investors regaining confidence in the fund manager (Levaux 2018). Keep in mind, this increase in fund assets comes in a period when active funds as a whole are experiencing a stiff unpopularity among investors. To complement the large equity fund rebound, American Funds has begun to make its mark in the bond market. The Bond Fund of America and Intermediate Bond Fund of America together brought in nearly $550 million in fund assets (Levaux 2018). While not yet returning to pre-2008 form, American Funds has made a statement that it remains as a leading active-fund manager.


American Funds High Expenses/Fees


A huge deterrent for many investors considering American Funds is its high cost. When simply examining expense ratio, funds such as AMCAP and Growth Fund of America have ratios much lower than the average in this category. However, active funds are often “loaded”, meaning there is either a front-end (or back-end) “load”, or fee, assessed. American Funds is no exception, charging a front-end load of nearly 6%. In the past, the prominent fund family has been able to highlight the performance of their funds as justification of the fee. In recent times, beleaguered investors have begun to make the transitions to no-load passive funds.


American Funds Revenue-Sharing


Additionally, it should not go unmentioned the controversy surrounding American Funds in the last few years. It has been discovered they established “preferred partnerships” with advising firms, Edward Jones in particular, providing incentive to market certain funds to the advisors’ clients. While this does much to push the American Funds brand and funds to investors utilizing planners and advisors, it brings about fiduciary and ethical concerns regarding their role. Despite these concerns, they maintain an overall high level of satisfaction among its investors based on the surge of asset funds.


Verdict: Shaky as of Late, Still A Top Family of Mutual Funds


Many critics of American Funds are quick to point out the more recent 10-year subpar performance. They perceive this “omen” as an indication the long-tenured group of funds – and active funds in general – has finally run its course. Being embroiled in the revenue-sharing controversy has certainly done little to improve its public image. While the recent dip in performance combined with its high fees do warrant careful consideration, one must remember that mutual funds are volatile and designed for long-term investors. It remains a top-tier option in the realm of large blend funds. Choosing a large equity fund from the American Funds family for the long-term (20-plus years) could potentially bring investors one of the highest returns in the industry. Their unique focus on active management and knack for performing at a high level over longer periods ensures American Funds does not plan on fading away anytime soon.


Updated on 3/17/2018.