If investors are looking at the Mutual Fund Equity Report fund category, Vanguard STAR Fund (VGSTX Quick QuoteVGSTX - Free Report) could be a potential option. VGSTX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VGSTX. Vanguard STAR Fund debuted in March of 1985. Since then, VGSTX has accumulated assets of about $23.21 billion, according to the most recently available information. 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. VGSTX has a 5-year annualized total return of 6.83% and it sits 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 5.35%, which places it in the middle third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

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. VGSTX's standard deviation over the past three years is 13.77% compared to the category average of 12.39%. The fund's standard deviation over the past 5 years is 13.8% compared to the category average of 12.82%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 0.7, so it is likely going to be less volatile than the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. VGSTX's 5-year performance has produced a negative alpha of -2.23, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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, VGSTX is a no load fund. It has an expense ratio of 0.32% compared to the category average of 0.85%. From a cost perspective, VGSTX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $1,000; each subsequent investment needs to be at least $1.

Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.

Bottom Line

Overall, Vanguard STAR Fund ( VGSTX ) 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.

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