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Is VWITX a Strong Bond Fund Right Now?

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On the lookout for a Muni - Bonds fund? Starting with Vanguard Intermediate-Term Tax-Exempt Investor (VWITX - Free Report) is one possibility. VWITX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We classify VWITX in the Muni - Bonds category, an area rife with potential choices. Muni - Bonds funds focus their investments on debt securities issued by state and local governments. These are typically used to pay for the construction of infrastructure, the operation of public schools, and other municipal functions. These securities can come in the form of revenue bonds, which are backed by taxes, as well as " general obligation " bonds that are not backed by a defined source. Investors are usually interested that come with most municipal bonds, which can be especially important for those in higher tax brackets.

History of Fund/Manager

VWITX finds itself in the Vanguard Group family, based out of Malvern, PA. Since Vanguard Intermediate-Term Tax-Exempt Investor made its debut in September of 1977, VWITX has garnered more than $3.48 billion in assets. James D'Arcy is the fund's current manager and has held that role since June of 2013.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of 3.54%, and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 4.46%, 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 VWITX over the past three years is 3.59% compared to the category average of 9.03%. The fund's standard deviation over the past 5 years is 3.49% compared to the category average of 7.93%. This makes the fund less volatile than its peers over the past half-decade.

This fund has a beta of 0.63, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, VWITX has a negative alpha of -0.1, 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, VWITX has 71.11% in high quality bonds rated at least 'AA' or higher, while 26.58% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of AA, and focuses on high quality securities.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, VWITX is a no load fund. It has an expense ratio of 0.17% compared to the category average of 0.83%. Looking at the fund from a cost perspective, VWITX 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

Overall, Vanguard Intermediate-Term Tax-Exempt Investor ( VWITX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Muni - Bonds, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.


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