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There are plenty of choices in the Muni - Bonds category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard High-Yield Tax-Exempt Investor (VWAHX - Free Report) . VWAHX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We classify VWAHX in the Muni - Bonds category, an area rife with potential choices. Muni - Bonds funds focus their investments on debt securities issued by state and local governments. These are typically used to pay for the construction of infrastructure, the operation of public schools, and other municipal functions. These securities can come in the form of revenue bonds, which are backed by taxes, as well as " general obligation " bonds that are not backed by a defined source. Investors are usually interested that come with most municipal bonds, which can be especially important for those in higher tax brackets.
History of Fund/Manager
VWAHX finds itself in the Vanguard Group family, based out of Malvern, PA. Since Vanguard High-Yield Tax-Exempt Investor made its debut in December of 1978, VWAHX has garnered more than $1.88 billion in assets. The fund's current manager, Mathew M. Kiselak, has been in charge of the fund since July of 2010.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. VWAHX has a 5-year annualized total return of 4.61% 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 3.13%, 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. VWAHX's standard deviation over the past three years is 3.82% compared to the category average of -7.75%. The standard deviation of the fund over the past 5 years is 3.42% compared to the category average of -3.57%. This makes the fund more volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.
If you believe interest rates will rise, this is an important factor to look at. VWAHX has a modified duration of 6.84, which suggests that the fund will decline 6.84% 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. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 5.06% means that a $10,000 investment should result in a yearly payout of $506.
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 1.14, this fund is more volatile than a broad market index of fixed income securities. Taking this into account, VWAHX has a positive alpha of 0.68, 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 22.4% in high quality bonds rated at least 'AA' or higher, while 61.04% 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 1.15%. From a cost perspective, VWAHX is actually cheaper than its peers.
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 High-Yield Tax-Exempt Investor ( VWAHX ) has a high Zacks Mutual Fund rank, strong performance, worse downside risk, and lower fees compared to its peers.
This could just be the start of your research on VWAHXin the Muni - Bonds category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.
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Is VWAHX a Strong Bond Fund Right Now?
There are plenty of choices in the Muni - Bonds category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard High-Yield Tax-Exempt Investor (VWAHX - Free Report) . VWAHX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We classify VWAHX in the Muni - Bonds category, an area rife with potential choices. Muni - Bonds funds focus their investments on debt securities issued by state and local governments. These are typically used to pay for the construction of infrastructure, the operation of public schools, and other municipal functions. These securities can come in the form of revenue bonds, which are backed by taxes, as well as " general obligation " bonds that are not backed by a defined source. Investors are usually interested that come with most municipal bonds, which can be especially important for those in higher tax brackets.
History of Fund/Manager
VWAHX finds itself in the Vanguard Group family, based out of Malvern, PA. Since Vanguard High-Yield Tax-Exempt Investor made its debut in December of 1978, VWAHX has garnered more than $1.88 billion in assets. The fund's current manager, Mathew M. Kiselak, has been in charge of the fund since July of 2010.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. VWAHX has a 5-year annualized total return of 4.61% 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 3.13%, 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. VWAHX's standard deviation over the past three years is 3.82% compared to the category average of -7.75%. The standard deviation of the fund over the past 5 years is 3.42% compared to the category average of -3.57%. This makes the fund more volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.
If you believe interest rates will rise, this is an important factor to look at. VWAHX has a modified duration of 6.84, which suggests that the fund will decline 6.84% 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. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 5.06% means that a $10,000 investment should result in a yearly payout of $506.
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 1.14, this fund is more volatile than a broad market index of fixed income securities. Taking this into account, VWAHX has a positive alpha of 0.68, 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 22.4% in high quality bonds rated at least 'AA' or higher, while 61.04% 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 1.15%. From a cost perspective, VWAHX is actually cheaper than its peers.
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 High-Yield Tax-Exempt Investor ( VWAHX ) has a high Zacks Mutual Fund rank, strong performance, worse downside risk, and lower fees compared to its peers.
This could just be the start of your research on VWAHXin the Muni - Bonds category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.