American Century Investments is a prominent global asset management firm that has been helping individuals and institutions reach their financial goals for decades. Founded with a focus on long-term growth and a unique commitment to medical research, the company offers a wide array of investment products including mutual funds, exchange-traded funds (ETFs), and retirement accounts. Whether you are a first-time investor or a seasoned professional, understanding how this firm operates can help you decide if it is the right fit for your financial portfolio.
The History of American Century Investments
American Century Investments was founded in 1958 by James E. Stowers Jr. in Kansas City, Missouri. Originally known as Twentieth Century Mutual Funds, the firm started with just two funds and a handful of investors. Stowers built the company on the principle of using a systematic, data-driven approach to identify companies with accelerating earnings and sales growth.
Over the years, the company expanded its offerings and rebranded as American Century Investments in 1997. Today, it manages hundreds of billions of dollars for millions of clients worldwide. Despite its global reach, the firm remains headquartered in Kansas City and maintains a reputation for a disciplined, research-heavy investment style.
A Unique Business Model: Funding Medical Research
One of the most distinctive aspects of American Century Investments is its ownership structure. A significant portion of the company—over 40 percent—is owned by the Stowers Institute for Medical Research. This non-profit organization focuses on finding cures and treatments for gene-based diseases like cancer and diabetes.
Because of this ownership, a large share of the profits generated by American Century Investments goes directly toward funding life-saving medical research. Since 2000, the firm has distributed over $2 billion in dividends to the Stowers Institute. For many investors, this “socially responsible” element is a major factor in choosing the firm, as their investment management fees contribute to a greater cause.
Types of Investment Products Offered
American Century provides a comprehensive suite of investment vehicles designed to meet various financial needs. Their products are categorized by asset class, investment style, and risk tolerance.
Mutual Funds
Mutual funds remain the core of the firm’s business. They offer a diverse selection of funds, including:
- Growth Funds: These focus on companies expected to grow at an above-average rate compared to the market.
- Value Funds: These target companies that the firm believes are undervalued by the market.
- Income Funds: Designed for investors seeking regular payments, these funds primarily invest in bonds and dividend-paying stocks.
- International Funds: These provide exposure to markets outside of the United States, including both developed and emerging economies.
Exchange-Traded Funds (ETFs)
In recent years, American Century has expanded into the ETF market. Unlike traditional index ETFs that simply track a market benchmark, many of their ETFs are actively managed. This means professional portfolio managers make specific buy and sell decisions to try and outperform the market, rather than just matching its performance.
Target-Date Funds
Target-date funds are a popular choice for retirement savers. You choose a fund with a year that closely matches your expected retirement date (e.g., Target 2050). The fund automatically adjusts its asset allocation over time, becoming more conservative as you get closer to retirement age.
Retirement and Savings Accounts
Beyond individual funds, American Century provides the account structures necessary to hold these investments. They cater to individuals, families, and small business owners.
Individual Retirement Accounts (IRAs)
The firm offers both Traditional and Roth IRAs. A Traditional IRA may offer tax-deductible contributions, while a Roth IRA allows for tax-free withdrawals in retirement. Choosing between the two depends on your current income level and your expectations for future tax rates.
529 College Savings Plans
For parents and grandparents looking to save for education, American Century manages 529 plans. These plans offer tax advantages when the funds are used for qualified education expenses, such as tuition, books, and room and board at accredited institutions.
Small Business Retirement Plans
Small business owners can set up SEP IRAs or SIMPLE IRAs through American Century. These plans are generally easier to maintain than a full 401(k) and allow both employers and employees to contribute toward retirement savings.
How to Open an Account
Opening an account with American Century Investments is a straightforward process that can be completed online or over the phone. Follow these steps to get started:
- Determine Your Goal: Decide if you are saving for retirement, a child’s education, or a general long-term goal.
- Select an Account Type: Choose between a standard brokerage account, an IRA, or a 529 plan based on your goal.
- Choose Your Investments: You can select specific funds yourself or use their online tools to find a portfolio that matches your risk tolerance.
- Provide Personal Information: You will need your Social Security number, birth date, and employment information.
- Fund the Account: You can link a bank account to transfer funds electronically, or mail a check to the firm.
Fees and Investment Minimums
Like all investment firms, American Century charges fees for managing your money. It is important to understand these costs, as they can impact your long-term returns.
The most common fee is the expense ratio, which is an annual percentage taken from the fund’s assets to cover management and administrative costs. American Century’s fees are generally competitive, though they may be higher than those of “passive” index fund providers because of the costs associated with active management and research.
Investment minimums vary by fund and account type. Many funds require an initial investment of $2,500, though this minimum is often lowered to $500 or $1,000 if you set up an automatic monthly investment plan.
Pros and Cons of Investing with American Century
Before committing your capital, consider the advantages and potential drawbacks of using this firm.
Pros
- Mission-Driven: A portion of your fees supports cancer and genetic research.
- Expertise: They have a long history of active management and deep research capabilities.
- Customer Service: The firm is well-regarded for providing helpful, US-based customer support.
- Educational Resources: Their website offers a wealth of articles, calculators, and tools to help you plan for the future.
Cons
- Active Management Risk: Actively managed funds do not always outperform the market and can sometimes lag behind simple index funds.
- Costs: Fees may be higher than those found at discount brokers that focus exclusively on low-cost ETFs.
- Minimums: Some investors may find the initial investment requirements higher than those of newer fintech apps.
Is American Century Right for You?
American Century Investments is an excellent choice for investors who value professional management and want their investment dollars to support a significant philanthropic cause. Their wide range of products makes them a “one-stop shop” for many financial needs, particularly for those focused on long-term retirement planning.
However, if your primary goal is to pay the absolute lowest fees possible through passive indexing, you might compare their offerings with other providers. Regardless of your choice, the firm’s stability and unique commitment to medical research make it a standout name in the financial industry.
Planning for your financial future is a continuous process. To learn more about managing your money, explore our other articles on Understanding Mutual Funds and How to Choose the Right IRA for more helpful guidance.