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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

Content is the opinion of the author and does not represent the position of any other person or entity. Information is from sources believed to be reliable but cannot be guaranteed.

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Growth Fund of America

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email

Q: What do you think of Growth Fund of America as a primary investment for a retirement savings account?

A: The investment strategy is excellent but the specific choice of investment vehicle is poor. Growth Fund of America is the largest common stock mutual fund in existence. By common sense and by practical necessity, its investment strategy and performance is to reflect the stock market overall, and due to its size, the fund performance does not reflect the performance of the fund's managers. While investing is in the overall stock market performance (known as "index investing") is a great idea for a retirement plan, this specific fund charges more than five times the fee charged by the best index funds. On top of that, there is a sales charge that comes directly out of your deposits. Index funds usually do not have a sales charge. The difference in charges can add up to more than $25,000 over the working career of a typical retirement plan participant. A number of academic and popular press articles have been published on this issue. While is obviously not illegal for a fund to evolve to an index fund and still charge fees for active management, it is clearly not in the best interest of investors who simply do not know any better but relied on advice from commission-based investment advisers.


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