Investment Grade Bond - Intermediate fund seekers should consider taking a look at Vanguard Intermediate-Term Investment-Grade Investor (VFICX Quick QuoteVFICX - Free Report) . VFICX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

We classify VFICX in the Investment Grade Bond - Intermediate category, an area rife with potential choices. Investment Grade Bond - Intermediate funds target the middle part of the curve, typically by investing in bonds that mature in more than three years but less than 15 years. At these maturity levels, fixed income instruments have medium duration risk--but they compensate investors with a respectable yield compared to shorter maturity options. Finally, a focus on investment grade ensures that these funds are safer, but yields will be lower than in the junk bond category.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VFICX. Vanguard Intermediate-Term Investment-Grade Investor made its debut in November of 1993, and since then, VFICX has accumulated about $1.50 billion in assets, per the most up-to-date date available. The fund's current manager, Daniel Shaykevich, has been in charge of the fund since April of 2018.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 0.97%, and it sits 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 7.82%, which places it in the bottom 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. The standard deviation of VFICX over the past three years is 7.19% compared to the category average of 12.93%. The fund's standard deviation over the past 5 years is 7.32% compared to the category average of 13.37%. This makes the fund less volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a given bond's interest rate sensitivity, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.

For investors who think interest rates will rise, this is an important factor to consider. VFICX has a modified duration of 6.1, which suggests that the fund will decline 6.1% for every hundred-basis-point increase in interest rates.

Income

Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 4.7% means that a $10,000 investment should result in a yearly payout of $470.

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. Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture.

With a beta of 0.98, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, VFICX has a positive alpha of 2 , 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, VFICX has 87.1% in medium quality bonds, with ratings of "A" to "BBB". The fund's junk bond component-bonds rated "BB" or below-is at 1.2%, giving VFICX an average quality of A. This means that it focuses on high quality securities.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, VFICX is a no load fund. It has an expense ratio of 0.20% compared to the category average of 0.91%. So, VFICX 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.

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

Bottom Line

Overall, Vanguard Intermediate-Term Investment-Grade Investor ( VFICX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, better downside risk, and lower fees, Vanguard Intermediate-Term Investment-Grade Investor ( VFICX ) looks like a great potential choice for investors right now.

For additional information on the Investment Grade Bond - Intermediate area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into VFICX too 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.