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Is VTABX a Strong Bond Fund Right Now?

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There are plenty of choices in the International Bond - Developed category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard Total International Bond Index Admiral (VTABX - Free Report) . The fund does not have a Zacks Mutual Fund Rank, though we have been able to explore other metrics like performance, volatility, and cost.

Objective

VTABX is one of many International Bond - Developed funds to choose from. International Bond - Developed funds offer investors geographic diversification by focusing on fixed income securities from developed nations besides the United States. Top holdings include assets from countries like Japan, Germany, the UK, France, and Australia. While these is certainly an advantage, investors should be aware of currency risk.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VTABX. Vanguard Total International Bond Index Admiral made its debut in May of 2013, and since then, VTABX has accumulated about $22.97 billion in assets, per the most up-to-date date available. Joshua Barrickman is the fund's current manager and has held that role since May of 2013.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of -0.11%, and is in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 3.86%, 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. Compared to the category average of 8.9%, the standard deviation of VTABX over the past three years is 4.44%. The standard deviation of the fund over the past 5 years is 5.31% compared to the category average of 10.33%. 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.

If you believe interest rates will rise, this is an important factor to look at. VTABX has a modified duration of 6.65, which suggests that the fund will decline 6.65% for every hundred-basis-point increase in interest rates.

Income

Since income is, of course, a big reason for purchasing a fixed income security, it is always 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 2.73% means that a $10,000 investment should result in a yearly payout of $273.

If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur if rates are lower in the future when compared to the initial purchase date of the bond. Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks.

This fund has a beta of 0.63, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, VTABX has a negative alpha of -0.96, 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, VTABX is a no load fund. It has an expense ratio of 0.10% compared to the category average of 0.81%. VTABX is actually cheaper than its peers when you consider factors like cost.

Investors should also note that the minimum initial investment for the product is $3,000 and that each subsequent investment needs to be at $1.

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 the International Bond - Developed 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 VTABX too 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.

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