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Any investors hoping to find an Investment Grade Bond - Short fund might consider looking past Vanguard Short-Term Investor Growth Income Investor (VFSTX - Free Report) . VFSTX has a Zacks Mutual Fund Rank of 4 (Sell), 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. The Vanguard Short-Term Investor Growth Income Investor made its debut in October of 1982 and VFSTX has managed to accumulate roughly $8.51 billion in assets, as of the most recently available information. The fund is currently managed by Samuel C. Martinez who has been in charge of the fund since April of 2018.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 1.64%, and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 1.48%, 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. Compared to the category average of 6.26%, the standard deviation of VFSTX over the past three years is 1.27%. Over the past 5 years, the standard deviation of the fund is 1.22% compared to the category average of 6.12%. 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.
For investors who think interest rates will rise, this is an important factor to consider. VFSTX has a modified duration of 2.6, which suggests that the fund will decline 2.6% for every hundred-basis-point increase in interest rates.
Income
Since income is, of course, a big reason for purchasing a fixed income security, it is always important to consider the fund's average coupon. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 2.3% means that a $10,000 investment should result in a yearly payout of $230.
If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur if rates are lower in the future when compared to the initial purchase date of the bond.
Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture. With a beta of 0.43, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, VFSTX has a positive alpha of 0.46, 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 42.7% in high quality bonds rated at least 'AA' or higher, while 52.8% 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
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, VFSTX is a no load fund. It has an expense ratio of 0.20% compared to the category average of 0.77%. 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 low 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 somewhat weak choice for investors right now.
Your research on the Investment Grade Bond - Short segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.
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Is VFSTX a Strong Bond Fund Right Now?
Any investors hoping to find an Investment Grade Bond - Short fund might consider looking past Vanguard Short-Term Investor Growth Income Investor (VFSTX - Free Report) . VFSTX has a Zacks Mutual Fund Rank of 4 (Sell), 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. The Vanguard Short-Term Investor Growth Income Investor made its debut in October of 1982 and VFSTX has managed to accumulate roughly $8.51 billion in assets, as of the most recently available information. The fund is currently managed by Samuel C. Martinez who has been in charge of the fund since April of 2018.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 1.64%, and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 1.48%, 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. Compared to the category average of 6.26%, the standard deviation of VFSTX over the past three years is 1.27%. Over the past 5 years, the standard deviation of the fund is 1.22% compared to the category average of 6.12%. 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.
For investors who think interest rates will rise, this is an important factor to consider. VFSTX has a modified duration of 2.6, which suggests that the fund will decline 2.6% for every hundred-basis-point increase in interest rates.
Income
Since income is, of course, a big reason for purchasing a fixed income security, it is always important to consider the fund's average coupon. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 2.3% means that a $10,000 investment should result in a yearly payout of $230.
If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur if rates are lower in the future when compared to the initial purchase date of the bond.
Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture. With a beta of 0.43, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, VFSTX has a positive alpha of 0.46, 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 42.7% in high quality bonds rated at least 'AA' or higher, while 52.8% 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
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, VFSTX is a no load fund. It has an expense ratio of 0.20% compared to the category average of 0.77%. 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 low 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 somewhat weak choice for investors right now.
Your research on the Investment Grade Bond - Short segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.