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Is Vanguard 500 Index Admiral (VFIAX) a Strong Mutual Fund Pick Right Now?

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Looking for an Index fund? You may want to consider Vanguard 500 Index Admiral (VFIAX - Free Report) as a possible option. While this fund is not tracked by the Zacks Mutual Fund Rank, we were able to examine other factors like performance, volatility, and cost.

History of Fund/Manager

VFIAX finds itself in the Vanguard Group family, based out of Malvern, PA. Vanguard 500 Index Admiral debuted in November of 2000. Since then, VFIAX has accumulated assets of about $296.57 billion, according to the most recently available information. The fund is currently managed by Donald M. Butler who has been in charge of the fund since April of 2016.

Performance

Of course, investors look for strong performance in funds. VFIAX has a 5-year annualized total return of 11.3% 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 13.32%, 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 VFIAX over the past three years is 12.12% compared to the category average of 8.75%. Over the past 5 years, the standard deviation of the fund is 11.99% compared to the category average of 9.24%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. In VFIAX's case, the fund lost 50.92% in the most recent bear market and underperformed its peer group by 5%. This makes the fund a possibly worse choice than its peers during a sliding market environment.

Nevertheless, with a 5-year beta of 1, the fund is likely to be as volatile as the market average. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. Over the past 5 years, the fund has a negative alpha of -0.02. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Investigating the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is principally on equities that are traded in the United States.

This fund is currently holding about 79.06% stock in stocks, and these companies have an average market capitalization of $209.02 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Finance
Turnover is 4%, which means this fund makes fewer trades than comparable funds.

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, VFIAX is a no load fund. It has an expense ratio of 0.04% compared to the category average of 0.76%. From a cost perspective, VFIAX is actually cheaper than its peers.

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

Bottom Line

Want even more information about VFIAX? 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. 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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