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Is Vanguard Windsor-II Investor (VWNFX) a Strong Mutual Fund Pick Right Now?

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If you have been looking for Large Cap Value funds, a place to start could be Vanguard Windsor-II Investor (VWNFX - Free Report) . VWNFX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

VWNFX is one of many Large Cap Value mutual funds to choose from. These funds invest in equities with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value. This strategy can often produce low P/E ratios and high dividend yields; growth levels; however, growth levels are oftentimes cut back. These funds'high growth opportunities are slowed even more since large-cap stocks are usually in more stable industries with low to moderate growth prospects. Thus, investors interested in a stable income stream fund Large Cap Value funds very appealing.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VWNFX. Vanguard Windsor-II Investor made its debut in June of 1985, and since then, VWNFX has accumulated about $12.06 billion 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 in particular has delivered a 5-year annualized total return of 6.78%, and it sits in the middle 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 7.3%, which places it in the bottom 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. Over the past three years, VWNFX's standard deviation comes in at 10.8%, compared to the category average of 9.19%. Looking at the past 5 years, the fund's standard deviation is 10.82% compared to the category average of 9.47%. This makes the fund more 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, VWNFX lost 52.87% and underperformed its peer group by 2.17%. This could mean that the fund is a worse choice than comparable funds during a bear market.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. VWNFX has a 5-year beta of 1.01, 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. With a negative alpha of -3.93, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Examining 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 primarily on equities that are traded in the United States.

This fund is currently holding about 89.08% stock in stocks, which have an average market capitalization of $172.74 billion. The fund has the heaviest exposure to the following market sectors:

  1. Finance
  2. Technology
With turnover at about 52%, this fund is making fewer trades than comparable funds.

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, VWNFX is a no load fund. It has an expense ratio of 0.34% compared to the category average of 1.03%. Looking at the fund from a cost perspective, VWNFX 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.

Bottom Line

Overall, Vanguard Windsor-II Investor ( VWNFX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, Vanguard Windsor-II Investor ( VWNFX ) looks like a great potential choice for investors right now.

Don't stop here for your research on Large Cap Value funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare VWNFX to its peers as well 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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