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Expect More From Your Investments

Data from Morningstar. Based on calendar-year returns of actively managed funds in the Morningstar Large Value, Large Blend and Large Growth categories. For more information about filtering methodology, see Appendix.

Superior returns. Reduced risk. Every investor aspires to achieve these two simple yet elusive goals within their portfolios. But can investors have the best of both worlds in today’s increasingly complex environment?

We believe they can, with the help of a trusted financial advisor. Advisors play a critical role in guiding investors toward setting clear goals, maintaining realistic expectations and building investment portfolios with the potential to meet their objectives.  

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August 2014
 |  FEATURING Robert W. Lovelace

The New Geography of Investing®: Morningstar® Interviews Rob Lovelace

On June 19, 2014, Janet Yang of Morningstar interviewed Rob Lovelace at the Morningstar Investment Conference on the subject of The New Geography of Investing.

Watch Video (6:50)


Improving the Investor Experience

When markets are volatile, investors often react by making short-term decisions that can have long-term consequences for their portfolios. That’s especially true during a downturn. Why does that happen? Simply put, for many investors losses hurt more than gains help.

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The Persistency Question

Can you do it again?

If an investment manager has outpaced the index in the previous period, can the manager do so again? Put another way, is the track record the result of luck or skill?

Persistency is a measure that can help investors answer these questions. It is the percentage of time that funds continued to lead their indexes after having led in the previous period.

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The Problem With Averages

The argument for the superiority of passive, or index, investing over active management has been accepted and adopted by a significant number of academics, consultants and investors.

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Translating Numbers Into Outcomes

The Active Advantage Can Be the Difference Between Success and Shortfall

The 401(k) hypothetical $500-a-month investment represents a total of $120,000 for the 20-year period ended December 31, 2013. Data from published sources were calculated internally. For the constituents of the American Funds and index blend, as well as additional details about the data, see Specific Methodology for Hypothetical 20-Year Investments Illustrations.

This isn’t just an academic exercise. Investors have real needs and goals. In a world of underfunded pension plans and households at risk of running out of retirement income, it is crucial to select an investment manager with a proven track record of consistently outpacing the broad market. The right decision can transform long-term investment outcomes, and make the difference between success and shortfall.

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View fund expense ratios and returns. 

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

You could lose money by investing in the American Funds U.S. Government Money Market Fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund's sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.

This material is intended for use by financial professionals or in conjunction with the advice of a financial professional.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. 

Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries. Small-company stocks entail additional risks, and they can fluctuate in price more than larger company stocks. 

The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal than higher rated bonds. 

State-specific tax-exempt funds are more susceptible to factors adversely affecting issuers of their states' tax-exempt securities than more widely diversified municipal bond funds. Income from municipal bonds may be subject to state or local income taxes and/or the federal alternative minimum tax (except for The Tax-Exempt Bond Fund of America). Certain other income, as well as capital gain distributions, may be taxable. 

Bond ratings, which typically range from AAA/Aaa (highest) to D (lowest), are assigned by credit rating agencies such as Standard & Poor's, Moody's and/or Fitch, as an indication of an issuer's creditworthiness.

Bond prices and a bond fund's share price will generally move in the opposite direction of interest rates.

Investment allocations for funds of funds may not achieve fund objectives. There are expenses associated with the underlying funds in addition to fund-of-funds expenses. The funds' risks are directly related to the risks of the underlying funds, as described herein. 

Unlike mutual fund shares, investments in U.S. Treasuries are guaranteed by the U.S. government as to the payment of principal and interest. In addition, certificates of deposit (CDs) are FDIC-insured and, if held to maturity, offer a guaranteed return of principal.

Investment results assume all distributions are reinvested and reflect applicable fees and expenses. 

MSCI All Country World ex USA Index is a free float-adjusted market-capitalization-weighted index that is designed to measure equity market results in the global developed and emerging markets, excluding the United States.

Standard & Poor's 500 Composite Index is a market capitalization-weighted index based on the average weighted results of 500 widely held common stocks.

Expense ratios are as of each fund's prospectus. 

The Capital Group companies manage equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not to be comprehensive or to provide advice. 

Regular investing does not ensure a profit or protect against loss. Investors should consider their willingness to keep investing when share prices are declining.

When quoting fund results to your clients, please refer to the American Funds quarterly statistical update, which includes results that reflect deduction of applicable sales charges. Please remember when sharing information on the American Funds with your clients that, in addition to providing current results and prospectuses, you should also discuss the risks and costs associated with the investment.

Past results are not predictive of results in future periods.