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Is VWALX a Strong Bond Fund Right Now?

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On the lookout for a Muni - Bonds fund? Starting with Vanguard High-Yield Tax-Exempt Admiral (VWALX - Free Report) is one possibility. VWALX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes VWALX as Muni - Bonds, which is a segment packed with options. Muni - Bonds funds invest in debt securities issued by states or local municipalities. These are generally used to finance construction of infrastructure, pay for schools, or other government functions. Some are backed by taxes (revenue bonds), while others are " general obligation " and may not be backed by a defined source. Investors usually appreciate the tax benefits that come with many municipal bonds, which are especially impressive for those in high tax brackets.

History of Fund/Manager

VWALX finds itself in the Vanguard Group family, based out of Malvern, PA. The Vanguard High-Yield Tax-Exempt Admiral made its debut in November of 2001 and VWALX has managed to accumulate roughly $12.54 billion in assets, as of the most recently available information. The fund is currently managed by Mathew Kiselak who has been in charge of the fund since July of 2010.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 4.14%, and it sits 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 3.87%, 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. VWALX's standard deviation over the past three years is 5.33% compared to the category average of 8.49%. Over the past 5 years, the standard deviation of the fund is 4.89% compared to the category average of 7.79%. This makes the fund less volatile than its peers over the past half-decade.

With a beta of 0.87, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, VWALX has a negative alpha of -0.25, 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, VWALX has 29.5% in high quality bonds rated at least 'AA' or higher, while 55.98% 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, VWALX is a no load fund. It has an expense ratio of 0.09% compared to the category average of 0.82%. So, VWALX is actually cheaper than its peers from a cost perspective.

This fund requires a minimum initial investment of $50,000, and each subsequent investment should be at least $1.

Bottom Line

Overall, Vanguard High-Yield Tax-Exempt Admiral ( VWALX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard High-Yield Tax-Exempt Admiral ( VWALX ) looks like a good potential choice for investors right now.

Want even more information about VWALX? 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. 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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