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There are plenty of choices in the Investment Grade Bond - Short category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard Short-Term Investor Growth Income Investor (VFSTX - Free Report) . VFSTX has a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.
Objective
VFSTX is classified in the Investment Grade Bond - Short segment by Zacks, an area full of investment potential. By investing in bonds that mature in less than two years, Investment Grade Bond - Short funds are focused on the short end of the curve. Fixed income instruments at this maturity level tend to have low duration risk, but they also pay out small yields compared to their longer-dated peers. Furthermore, these funds'focus on investment grade make them safer, but yields will be lower than in the junk bond category.
History of Fund/Manager
Vanguard Group is based in Malvern, PA, and is the manager of VFSTX. Vanguard Short-Term Investor Growth Income Investor debuted in October of 1982. Since then, VFSTX has accumulated assets of about $8.96 billion, according to the most recently available information. The fund is currently managed by Gregory S. Nassour who has been in charge of the fund since May of 2008.
Performance
Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 1.44%, and is in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 1.36%, 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, VFSTX's standard deviation comes in at 1.26%, compared to the category average of 6.34%. The fund's standard deviation over the past 5 years is 1.31% compared to the category average of 6.3%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a specific bond's interest rate sensitivity, and is an excellent way to judge how fixed income securities will respond to a shifting rate environment.
If you believe interest rates will rise, this is an important factor to look at. VFSTX has a modified duration of 2.62, which suggests that the fund will decline 2.62% for every hundred-basis-point increase in interest rates.
Income
It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 2.86% means that a $10,000 investment should result in a yearly payout of $286.
A higher coupon is good for those seeking a strong level of current income, but it could also pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.
Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks. VFSTX carries a beta of 0.4, 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 0.51, 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, VFSTX has 47.05% in high quality bonds rated at least 'AA' or higher, while 49.33% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of AA, and focuses on high quality securities.
Expenses
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, VFSTX is a no load fund. It has an expense ratio of 0.20% compared to the category average of 0.78%. VFSTX is actually cheaper than its peers when you consider factors like cost.
Investors need to be aware that with this product, the minimum initial investment is $3,000; each subsequent investment needs to be at least $1.
Bottom Line
Overall, Vanguard Short-Term Investor Growth Income Investor has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard Short-Term Investor Growth Income Investor looks like a good potential choice for investors right now.
Want even more information about VFSTX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.
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Is VFSTX a Strong Bond Fund Right Now?
There are plenty of choices in the Investment Grade Bond - Short category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard Short-Term Investor Growth Income Investor (VFSTX - Free Report) . VFSTX has a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.
Objective
VFSTX is classified in the Investment Grade Bond - Short segment by Zacks, an area full of investment potential. By investing in bonds that mature in less than two years, Investment Grade Bond - Short funds are focused on the short end of the curve. Fixed income instruments at this maturity level tend to have low duration risk, but they also pay out small yields compared to their longer-dated peers. Furthermore, these funds'focus on investment grade make them safer, but yields will be lower than in the junk bond category.
History of Fund/Manager
Vanguard Group is based in Malvern, PA, and is the manager of VFSTX. Vanguard Short-Term Investor Growth Income Investor debuted in October of 1982. Since then, VFSTX has accumulated assets of about $8.96 billion, according to the most recently available information. The fund is currently managed by Gregory S. Nassour who has been in charge of the fund since May of 2008.
Performance
Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 1.44%, and is in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 1.36%, 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, VFSTX's standard deviation comes in at 1.26%, compared to the category average of 6.34%. The fund's standard deviation over the past 5 years is 1.31% compared to the category average of 6.3%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a specific bond's interest rate sensitivity, and is an excellent way to judge how fixed income securities will respond to a shifting rate environment.
If you believe interest rates will rise, this is an important factor to look at. VFSTX has a modified duration of 2.62, which suggests that the fund will decline 2.62% for every hundred-basis-point increase in interest rates.
Income
It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 2.86% means that a $10,000 investment should result in a yearly payout of $286.
A higher coupon is good for those seeking a strong level of current income, but it could also pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.
Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks. VFSTX carries a beta of 0.4, 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 0.51, 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, VFSTX has 47.05% in high quality bonds rated at least 'AA' or higher, while 49.33% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of AA, and focuses on high quality securities.
Expenses
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, VFSTX is a no load fund. It has an expense ratio of 0.20% compared to the category average of 0.78%. VFSTX is actually cheaper than its peers when you consider factors like cost.
Investors need to be aware that with this product, the minimum initial investment is $3,000; each subsequent investment needs to be at least $1.
Bottom Line
Overall, Vanguard Short-Term Investor Growth Income Investor has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard Short-Term Investor Growth Income Investor looks like a good potential choice for investors right now.
Want even more information about VFSTX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.