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High Yield - Bonds fund seekers should consider taking a look at Vanguard High-Yield Corporate Admiral (VWEAX - Free Report) . VWEAX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We note that VWEAX is a High Yield - Bonds option, which is an area loaded with different investment choices. High Yield - Bonds funds are often known as " junk " bonds since they are below investment grade. This means they are at an elevated risk of default, at least when compared to their investment grade peers. On the plus side, junk bonds generally pay out higher yields, all while posing similar interest rate risks as we see with their investment grade counterparts.
History of Fund/Manager
VWEAX is a part of the Vanguard Group family of funds, a company based out of Malvern, PA. The Vanguard High-Yield Corporate Admiral made its debut in November of 2001 and VWEAX has managed to accumulate roughly $21.65 billion in assets, as of the most recently available information. The fund is currently managed by Michael L. Hong who has been in charge of the fund since February of 2008.
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 5.13%, 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 6.14%, which places it in the middle 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 VWEAX over the past three years is 4.38% compared to the category average of 6.67%. The standard deviation of the fund over the past 5 years is 4.74% compared to the category average of 7.17%. 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. VWEAX has a modified duration of 4.41, which suggests that the fund will decline 4.41% 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. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 5.87% means that a $10,000 investment should result in a yearly payout of $587.
For those seeking a strong level of current income, a higher coupon is typically good news. However, it could pose a reinvestment risk 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. VWEAX carries a beta of 0.3, 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 3.54, 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, VWEAX is a no load fund. It has an expense ratio of 0.13% compared to the category average of 1.02%. So, VWEAX is actually cheaper than its peers from a cost perspective.
Investors should also note that the minimum initial investment for the product is $50,000 and that each subsequent investment needs to be at $1.
Bottom Line
Overall, Vanguard High-Yield Corporate Admiral ( VWEAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard High-Yield Corporate Admiral ( VWEAX ) looks like a good potential choice for investors right now.
This could just be the start of your research on VWEAXin the High Yield - 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. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.
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Is VWEAX a Strong Bond Fund Right Now?
High Yield - Bonds fund seekers should consider taking a look at Vanguard High-Yield Corporate Admiral (VWEAX - Free Report) . VWEAX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We note that VWEAX is a High Yield - Bonds option, which is an area loaded with different investment choices. High Yield - Bonds funds are often known as " junk " bonds since they are below investment grade. This means they are at an elevated risk of default, at least when compared to their investment grade peers. On the plus side, junk bonds generally pay out higher yields, all while posing similar interest rate risks as we see with their investment grade counterparts.
History of Fund/Manager
VWEAX is a part of the Vanguard Group family of funds, a company based out of Malvern, PA. The Vanguard High-Yield Corporate Admiral made its debut in November of 2001 and VWEAX has managed to accumulate roughly $21.65 billion in assets, as of the most recently available information. The fund is currently managed by Michael L. Hong who has been in charge of the fund since February of 2008.
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 5.13%, 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 6.14%, which places it in the middle 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 VWEAX over the past three years is 4.38% compared to the category average of 6.67%. The standard deviation of the fund over the past 5 years is 4.74% compared to the category average of 7.17%. 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. VWEAX has a modified duration of 4.41, which suggests that the fund will decline 4.41% 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. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 5.87% means that a $10,000 investment should result in a yearly payout of $587.
For those seeking a strong level of current income, a higher coupon is typically good news. However, it could pose a reinvestment risk 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. VWEAX carries a beta of 0.3, 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 3.54, 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, VWEAX is a no load fund. It has an expense ratio of 0.13% compared to the category average of 1.02%. So, VWEAX is actually cheaper than its peers from a cost perspective.
Investors should also note that the minimum initial investment for the product is $50,000 and that each subsequent investment needs to be at $1.
Bottom Line
Overall, Vanguard High-Yield Corporate Admiral ( VWEAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard High-Yield Corporate Admiral ( VWEAX ) looks like a good potential choice for investors right now.
This could just be the start of your research on VWEAXin the High Yield - 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. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.