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Is Vanguard Diversified Equity Investor (VDEQX) a Strong Mutual Fund Pick Right Now?

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If you're looking for a Large Cap Blend fund category, then a potential option is Vanguard Diversified Equity Investor (VDEQX - Free Report) . VDEQX bears a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

VDEQX is classified in the Large Cap Blend segment by Zacks, which is an area full of potential. Targeting companies with market caps of more than $10 billion, Large Cap Blend mutual funds offer a stable investment choice; these funds are perfect for investors with a " buy and hold " mindset. Since blended funds mix large, more established firms into their portfolios, investors are exposed to both value and growth opportunities.

History of Fund/Manager

VDEQX finds itself in the Vanguard Group family, based out of Malvern, PA. Vanguard Diversified Equity Investor debuted in June of 2005. Since then, VDEQX has accumulated assets of about $2.36 billion, according to the most recently available information. The fund's current manager, William Coleman, has been in charge of the fund since February of 2013.

Performance

Investors naturally seek funds with strong performance. VDEQX has a 5-year annualized total return of 18.01% and is in the bottom 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 14.75%, which places it in the bottom 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. VDEQX's standard deviation over the past three years is 20.81% compared to the category average of 20.18%. The standard deviation of the fund over the past 5 years is 16.7% compared to the category average of 16.81%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 1.1, which means it is hypothetically more volatile than the market at large. 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. The fund has produced a positive alpha over the past 5 years of 0.42, which shows that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Examining the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is primarily on equities that are traded in the United States.

The mutual fund currently has 88.99% of its holdings in stocks and it has a negligible amount of assets in foreign securities. Turnover is about 14%, so those in charge of the fund make fewer trades than the average comparable fund.

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, VDEQX is a no load fund. It has an expense ratio of 0.35% compared to the category average of 0.97%. Looking at the fund from a cost perspective, VDEQX is actually cheaper than its peers.

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 Diversified Equity Investor ( VDEQX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a somewhat average choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Large Cap Blend, make sure to go to www.zacks.com/funds/mutual-funds for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.


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