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Is VBIIX a Strong Bond Fund Right Now?

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There are plenty of choices in the Diversified Bonds category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard Intermediate-Term Bond Index Investor (VBIIX - Free Report) . VBIIX has no Zacks Mutual Fund Rank, but we have been able to look into other metrics like performance, volatility, and cost.

Objective

VBIIX is one of many Diversified Bonds funds to choose from.Diversified Bonds funds give investors exposure to a variety of fixed income types that span across different issuers, maturities, and credit levels. Usually, these funds will have a good amount of exposure to government debt, in addition to modest holdings in the corporate bond market.

History of Fund/Manager

Vanguard Group is responsible for VBIIX, and the company is based out of Malvern, PA. The Vanguard Intermediate-Term Bond Index Investor made its debut in February of 1994 and VBIIX has managed to accumulate roughly $40.48 million in assets, as of the most recently available information. The fund is currently managed by Joshua Barrickman who has been in charge of the fund since April of 2008.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of -0.69%, and is 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 4.18%, which places it in the top 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 VBIIX over the past three years is 6.17% compared to the category average of 9.76%. Looking at the past 5 years, the fund's standard deviation is 6.94% compared to the category average of 11.22%. 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, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.

For investors who think interest rates will rise, this is an important factor to consider. VBIIX has a modified duration of 6.06, which suggests that the fund will decline 6.06% for every hundred-basis-point increase in interest rates.

This fund has a beta of 1.01, meaning that it is more volatile than a broad market index of fixed income securities. Taking this into account, VBIIX has a positive alpha of 0.22, which measures performance on a risk-adjusted basis.

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, VBIIX is a no load fund. It has an expense ratio of 0.15% compared to the category average of 0.81%. VBIIX is actually cheaper than its peers when you consider factors like cost.

This fund requires a minimum initial investment of $0, while there is no minimum for each subsequent investment.

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

Bottom Line

For additional information on this product, or to compare it to other mutual funds in the Diversified Bonds, 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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