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Is VWAHX a Strong Bond Fund Right Now?

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If investors are looking at the Mutual Fund Bond fund category, Vanguard High-Yield Tax-Exempt Investor (VWAHX - Free Report) could be a potential option. VWAHX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VWAHX. Vanguard High-Yield Tax-Exempt Investor debuted in December of 1978. Since then, VWAHX has accumulated assets of about $2.28 billion, according to the most recently available information. The fund is currently managed by Mathew Kiselak who has been in charge of the fund since July of 2010.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 4.79%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 4.91%, which places it in the top third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, VWAHX's standard deviation comes in at 5.91%, compared to the category average of 9.74%. Over the past 5 years, the standard deviation of the fund is 4.84% compared to the category average of 8.43%. This makes the fund less volatile than its peers over the past half-decade.

VWAHX carries a beta of 0.82, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 0.71, which measures performance on a risk-adjusted basis.

Ratings

Investors should also consider a bond's rating, which is a grade ( 'AAA' to 'D' ) given to a bond that indicates its credit quality. With this letter scale in mind, VWAHX has 22.89% in high quality bonds rated at least 'AA' or higher, while 54.44% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of A, and focuses on high quality securities.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, VWAHX is a no load fund. It has an expense ratio of 0.17% compared to the category average of 0.79%. So, VWAHX is actually cheaper than its peers from a cost perspective.

While the minimum initial investment for the product is $3,000, investors should also note that each subsequent investment needs to be at least $1.

Bottom Line

Overall, Vanguard High-Yield Tax-Exempt Investor ( VWAHX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

Don't stop here for your research on Mutual Fund Bond funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare VWAHX to its peers as well for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.


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