Investment Grade Bond - Long fund seekers should not consider taking a look at Vanguard Long-Term Investment-Grade Income Admiral (VWETX Quick QuoteVWETX - Free Report) at this time. VWETX has a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

VWETX is classified in the Investment Grade Bond - Long segment by Zacks, an area full of possibilities. Investment Grade Bond - Long funds focus on the long end of the curve, typically by investing in bonds that mature in more than 10 years. While fixed income instruments at this maturity level usually have high duration risk, they compensate investors with a larger yield than their short-maturity counterparts. These funds tend to be safer due to their focus on investment grade, but yields will be smaller than funds in the junk bond category.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VWETX. Since Vanguard Long-Term Investment-Grade Income Admiral made its debut in February of 2001, VWETX has garnered more than $9.77 billion in assets. The fund's current manager is a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of -3.37%, and it sits in the bottom third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 4.52%, 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. Compared to the category average of 12.2%, the standard deviation of VWETX over the past three years is 12.5%. The fund's standard deviation over the past 5 years is 13.25% compared to the category average of 13.12%. This makes the fund more 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. VWETX has a modified duration of 12.4, which suggests that the fund will decline 12.4% for every hundred-basis-point increase in interest rates.

Income

We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 4.5% means that a $10,000 investment should result in a yearly payout of $450.

For those seeking a strong level of current income, a higher coupon is typically good news. However, it could pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks.

VWETX carries a beta of 1.75, meaning that the fund is more volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 0.94, 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, VWETX has 29.2% in high quality bonds rated at least "AA" or higher, while 68.7% 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, VWETX is a no load fund. It has an expense ratio of 0.10% compared to the category average of 0.70%. From a cost perspective, VWETX is actually cheaper than its peers.

While the minimum initial investment for the product is $50,000, investors should also note that 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 Long-Term Investment-Grade Income Admiral ( VWETX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.

Your research on the Investment Grade Bond - Long segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.