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There are plenty of choices in the Investment Grade Bond - Long category, but where should you start your research? Well, one fund that may not be worth investigating is Vanguard Long-Term Investment-Grade Income Investor (VWESX - Free Report) . VWESX bears a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance.
Objective
VWESX is classified in the Investment Grade Bond - Long segment by Zacks, an area full of possibilities. Investment Grade Bond - Long funds focus on the long end of the curve, typically by investing in bonds that mature in more than 10 years. While fixed income instruments at this maturity level usually have high duration risk, they compensate investors with a larger yield than their short-maturity counterparts. These funds tend to be safer due to their focus on investment grade, but yields will be smaller than funds in the junk bond category.
History of Fund/Manager
Vanguard Group is responsible for VWESX, and the company is based out of Malvern, PA. Vanguard Long-Term Investment-Grade Income Investor made its debut in July of 1973, and since then, VWESX has accumulated about $4.26 billion in assets, per the most up-to-date date available. The fund is currently managed by a team of investment professionals.
Performance
Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 6.07%, 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 5.16%, 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. The standard deviation of VWESX over the past three years is 6.48% compared to the category average of 6.88%. The standard deviation of the fund over the past 5 years is 7.1% compared to the category average of 7%. This makes the fund more 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 those that believe interest rates will rise, this is an important factor to consider. VWESX has a modified duration of 13.4, which suggests that the fund will decline 13.4% for every hundred-basis-point increase in interest rates.
Income
Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 4.3% means that a $10,000 investment should result in a yearly payout of $430.
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. This fund has a beta of 2.24, meaning that it is more volatile than a broad market index of fixed income securities. Taking this into account, VWESX has a positive alpha of 0.94, which measures performance on a risk-adjusted basis.
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, VWESX is a no load fund. It has an expense ratio of 0.22% compared to the category average of 0.91%. From a cost perspective, VWESX is actually cheaper than its peers.
This fund requires a minimum initial investment of $3,000, and each subsequent investment should be at least $1.
Bottom Line
Overall, Vanguard Long-Term Investment-Grade Income Investor ( VWESX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.
Your research on the Investment Grade Bond - Long 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 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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Is VWESX a Strong Bond Fund Right Now?
There are plenty of choices in the Investment Grade Bond - Long category, but where should you start your research? Well, one fund that may not be worth investigating is Vanguard Long-Term Investment-Grade Income Investor (VWESX - Free Report) . VWESX bears a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance.
Objective
VWESX is classified in the Investment Grade Bond - Long segment by Zacks, an area full of possibilities. Investment Grade Bond - Long funds focus on the long end of the curve, typically by investing in bonds that mature in more than 10 years. While fixed income instruments at this maturity level usually have high duration risk, they compensate investors with a larger yield than their short-maturity counterparts. These funds tend to be safer due to their focus on investment grade, but yields will be smaller than funds in the junk bond category.
History of Fund/Manager
Vanguard Group is responsible for VWESX, and the company is based out of Malvern, PA. Vanguard Long-Term Investment-Grade Income Investor made its debut in July of 1973, and since then, VWESX has accumulated about $4.26 billion in assets, per the most up-to-date date available. The fund is currently managed by a team of investment professionals.
Performance
Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 6.07%, 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 5.16%, 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. The standard deviation of VWESX over the past three years is 6.48% compared to the category average of 6.88%. The standard deviation of the fund over the past 5 years is 7.1% compared to the category average of 7%. This makes the fund more 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 those that believe interest rates will rise, this is an important factor to consider. VWESX has a modified duration of 13.4, which suggests that the fund will decline 13.4% for every hundred-basis-point increase in interest rates.
Income
Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 4.3% means that a $10,000 investment should result in a yearly payout of $430.
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. This fund has a beta of 2.24, meaning that it is more volatile than a broad market index of fixed income securities. Taking this into account, VWESX has a positive alpha of 0.94, which measures performance on a risk-adjusted basis.
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, VWESX is a no load fund. It has an expense ratio of 0.22% compared to the category average of 0.91%. From a cost perspective, VWESX is actually cheaper than its peers.
This fund requires a minimum initial investment of $3,000, and each subsequent investment should be at least $1.
Bottom Line
Overall, Vanguard Long-Term Investment-Grade Income Investor ( VWESX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.
Your research on the Investment Grade Bond - Long 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 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.