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Is Vanguard Emerging Markets Select Stock Investor (VMMSX) a Strong Mutual Fund Pick Right Now?

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Non US - Equity fund seekers may want to consider taking a look at Vanguard Emerging Markets Select Stock Investor (VMMSX - Free Report) . VMMSX has a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

VMMSX is classified in the Non US - Equity area by Zacks, and this segment is full of potential. Non US - Equity funds focus their investments on companies outside of the United States, which is an important distinction since global mutual funds tend to keep a sizable portion of their portfolio based in the United States. Most of these funds will allocate across emerging and developed markets, and can often extend across cap levels too.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VMMSX. Since Vanguard Emerging Markets Select Stock Investor made its debut in June of 2011, VMMSX has garnered more than $706.69 million in assets. The fund is currently managed by a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. VMMSX has a 5-year annualized total return of 3.98% and is in the middle 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 9.48%, 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. Over the past 5 years, the standard deviation of the fund is 15.93% compared to the category average of 1.25%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

It's always important to be aware of the downsides to any future investment, so one should not discount the risks that come with this segment.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. VMMSX has a 5-year beta of 0.92, which means it is likely to be less volatile than the market average. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. VMMSX's 5-year performance has produced a negative alpha of -5.03, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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, VMMSX is a no load fund and it has an expense ratio of 0.96%.

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

Bottom Line

With a rank of 'hold' we aren't getting a good signal one way or another on VMMSX. That is why it might be a good idea to consider other items, such as the fund's expense ratio of 0.96%, and how this compares to other potential options being considered for investment. If cheaper, it might make a decent choice, but a more expensive fund might be worth avoiding. Just make sure to pay attention to its rank in case it shifts in the near future.

This could just be the start of your research on VMMSXin the Non US - Equity 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. 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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