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On the lookout for a Government Bond - Short fund? Starting with Vanguard Short-Term Federal Investor (VSGBX - Free Report) is one possibility. VSGBX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
The world of Government Bond - Short funds is an area filled with options, such as VSGBX. Government Bond - Short funds hold securities issued by the federal government of the United States of America. These are seen as extremely low risk securities from a default perspective, and are often regarded as risk-free assets. This category focuses on the short end of the curve, and that results in lower yields, but also less sensitivity to interest rate fluctuations, too.
History of Fund/Manager
VSGBX is a part of the Vanguard Group family of funds, a company based out of Malvern, PA. Vanguard Short-Term Federal Investor made its debut in December of 1987, and since then, VSGBX has accumulated about $614.73 million in assets, per the most up-to-date date available. The fund is currently managed by Brian W. Quigley who has been in charge of the fund since January of 2015.
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 1.44%, 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 1.83%, 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 VSGBX over the past three years is 1.17% compared to the category average of 9.58%. The standard deviation of the fund over the past 5 years is 1.18% compared to the category average of 3.68%. 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.
For those that believe interest rates will rise, this is an important factor to consider. VSGBX has a modified duration of 2.35, which suggests that the fund will decline 2.35% 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 calculates the fund's average payout in a given year. For example, this fund's average coupon of 2.53% means that a $10,000 investment should result in a yearly payout of $253.
While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.
Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks. VSGBX carries a beta of 0.36, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a negative alpha of -0.31, which measures performance on a risk-adjusted basis.
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, VSGBX is a no load fund. It has an expense ratio of 0.20% compared to the category average of 1.99%. So, VSGBX is actually cheaper than its peers from a cost perspective.
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 Short-Term Federal Investor ( VSGBX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard Short-Term Federal Investor ( VSGBX ) looks like a good potential choice for investors right now.
Want even more information about VSGBX? 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. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.
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Is VSGBX a Strong Bond Fund Right Now?
On the lookout for a Government Bond - Short fund? Starting with Vanguard Short-Term Federal Investor (VSGBX - Free Report) is one possibility. VSGBX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
The world of Government Bond - Short funds is an area filled with options, such as VSGBX. Government Bond - Short funds hold securities issued by the federal government of the United States of America. These are seen as extremely low risk securities from a default perspective, and are often regarded as risk-free assets. This category focuses on the short end of the curve, and that results in lower yields, but also less sensitivity to interest rate fluctuations, too.
History of Fund/Manager
VSGBX is a part of the Vanguard Group family of funds, a company based out of Malvern, PA. Vanguard Short-Term Federal Investor made its debut in December of 1987, and since then, VSGBX has accumulated about $614.73 million in assets, per the most up-to-date date available. The fund is currently managed by Brian W. Quigley who has been in charge of the fund since January of 2015.
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 1.44%, 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 1.83%, 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 VSGBX over the past three years is 1.17% compared to the category average of 9.58%. The standard deviation of the fund over the past 5 years is 1.18% compared to the category average of 3.68%. 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.
For those that believe interest rates will rise, this is an important factor to consider. VSGBX has a modified duration of 2.35, which suggests that the fund will decline 2.35% 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 calculates the fund's average payout in a given year. For example, this fund's average coupon of 2.53% means that a $10,000 investment should result in a yearly payout of $253.
While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.
Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks. VSGBX carries a beta of 0.36, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a negative alpha of -0.31, which measures performance on a risk-adjusted basis.
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, VSGBX is a no load fund. It has an expense ratio of 0.20% compared to the category average of 1.99%. So, VSGBX is actually cheaper than its peers from a cost perspective.
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 Short-Term Federal Investor ( VSGBX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard Short-Term Federal Investor ( VSGBX ) looks like a good potential choice for investors right now.
Want even more information about VSGBX? 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. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.