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There are plenty of choices in the Government Bond - Long category, but where should you start your research? Well, one fund that you should consider investigating is Vanguard Long-Term Treasury Investor (VUSTX - Free Report) . VUSTX possesses a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.
Objective
VUSTX is part of the Government Bond - Long section, a segment that boasts an array of possible selections. Government Bond - Long funds hold securities issued by the federal government of the United States of America. These are seen as extremely low risk securities from a default perspective, and are often regarded as risk-free assets. This category focuses on the long end of the curve, and that results in higher yields, but greater sensitivity to interest rate fluctuations, too.
History of Fund/Manager
VUSTX finds itself in the Vanguard Group family, based out of Malvern, PA. Vanguard Long-Term Treasury Investor made its debut in May of 1986, and since then, VUSTX has accumulated about $473.72 million in assets, per the most up-to-date date available. The fund's current manager is a team of investment professionals.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of -5.2%, and it sits in the middle 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 -1.87%, 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. The standard deviation of VUSTX over the past three years is 12.94% compared to the category average of 11.83%. Over the past 5 years, the standard deviation of the fund is 13.68% compared to the category average of 13.25%. 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.
If you believe interest rates will rise, this is an important factor to look at. VUSTX has a modified duration of 14.17, which suggests that the fund will decline 14.17% for every hundred-basis-point increase in interest rates.
Income
It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 3.52% means that a $10,000 investment should result in a yearly payout of $352.
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.
With a beta of 2, this fund is more volatile than a broad market index of fixed income securities. Taking this into account, VUSTX has a negative alpha of -1.07 , which measures performance on a risk-adjusted basis.
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, VUSTX is a no load fund. It has an expense ratio of 0.20% compared to the category average of 0.65%. Looking at the fund from a cost perspective, VUSTX 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.
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 Treasury Investor ( VUSTX ) 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 the Government Bond - Long 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 VUSTX too 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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Is VUSTX a Strong Bond Fund Right Now?
There are plenty of choices in the Government Bond - Long category, but where should you start your research? Well, one fund that you should consider investigating is Vanguard Long-Term Treasury Investor (VUSTX - Free Report) . VUSTX possesses a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.
Objective
VUSTX is part of the Government Bond - Long section, a segment that boasts an array of possible selections. Government Bond - Long funds hold securities issued by the federal government of the United States of America. These are seen as extremely low risk securities from a default perspective, and are often regarded as risk-free assets. This category focuses on the long end of the curve, and that results in higher yields, but greater sensitivity to interest rate fluctuations, too.
History of Fund/Manager
VUSTX finds itself in the Vanguard Group family, based out of Malvern, PA. Vanguard Long-Term Treasury Investor made its debut in May of 1986, and since then, VUSTX has accumulated about $473.72 million in assets, per the most up-to-date date available. The fund's current manager is a team of investment professionals.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of -5.2%, and it sits in the middle 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 -1.87%, 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. The standard deviation of VUSTX over the past three years is 12.94% compared to the category average of 11.83%. Over the past 5 years, the standard deviation of the fund is 13.68% compared to the category average of 13.25%. 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.
If you believe interest rates will rise, this is an important factor to look at. VUSTX has a modified duration of 14.17, which suggests that the fund will decline 14.17% for every hundred-basis-point increase in interest rates.
Income
It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 3.52% means that a $10,000 investment should result in a yearly payout of $352.
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.
With a beta of 2, this fund is more volatile than a broad market index of fixed income securities. Taking this into account, VUSTX has a negative alpha of -1.07 , which measures performance on a risk-adjusted basis.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, VUSTX is a no load fund. It has an expense ratio of 0.20% compared to the category average of 0.65%. Looking at the fund from a cost perspective, VUSTX 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.
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 Treasury Investor ( VUSTX ) 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 the Government Bond - Long 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 VUSTX too 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.