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Is Vanguard Selected Value Fund (VASVX) a Strong Mutual Fund Pick Right Now?

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On the lookout for a Mid Cap Value fund? Starting with Vanguard Selected Value Fund (VASVX - Free Report) should not be a possibility at this time. VASVX holds a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

The world of Mid Cap Value funds is an area filled with options, like VASVX. Targeting medium-sized companies with a market cap between $2 billion and $10 billion, Mid Cap Value mutual funds more often than not choose stocks that hold solid value and income investment opportunities.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VASVX. Since Vanguard Selected Value Fund made its debut in February of 1996, VASVX has garnered more than $10.16 billion in assets. A team of investment professionals is the fund's current manager.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 9.42%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 8.73%, which places it in the top third during this time-frame.

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 11.48%, the standard deviation of VASVX over the past three years is 11.85%. The fund's standard deviation over the past 5 years is 11.13% compared to the category average of 11.27%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. In the most recent bear market, VASVX lost 48.06% and underperformed its peer group by 3.35%. This makes the fund a possibly worse choice than its peers during a sliding market environment.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. VASVX has a 5-year beta of 1, which means it is likely to be as volatile as the market average. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. Over the past 5 years, the fund has a negative alpha of -3.18. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Investigating the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is mostly on equities that are traded in the United States.

Right now, 92.28% of this mutual fund's holdings are stocks, which have an average market capitalization of $14.60 billion. The fund has the heaviest exposure to the following market sectors:

  1. Finance
  2. Industrial Cyclical
  3. Other

With turnover at about 64%, this fund makes fewer trades than its comparable peers.

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, VASVX is a no load fund. It has an expense ratio of 0.40% compared to the category average of 1.19%. VASVX is actually cheaper than its peers when you consider factors like cost.

This fund requires a minimum initial investment of $3,000, and each subsequent investment should be at least $1.

Bottom Line

Overall, Vanguard Selected Value Fund has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard Selected Value Fund looks like a somewhat weak choice for investors right now.

This could just be the start of your research on VASVXin the Mid Cap Value category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.


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