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Is Vanguard Materials Index Admiral (VMIAX) a Strong Mutual Fund Pick Right Now?

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There are plenty of choices in the Mid Cap Blend category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard Materials Index Admiral (VMIAX - Free Report) . VMIAX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

VMIAX is one of many funds to choose from. Because Mid Cap Blend mutual funds typically feature a portfolio filled with stocks of various sizes and styles, it allows for a diversification strategy focusing on companies with market caps between $2 billion and $10 billion. Mid-cap blends, while offering exciting growth potential, income opportunities, and value picks, offer some stability as well.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VMIAX. The Vanguard Materials Index Admiral made its debut in January of 2004 and VMIAX has managed to accumulate roughly $392.28 million in assets, as of the most recently available information. The fund is currently managed by William A. Coleman who has been in charge of the fund since August of 2015.

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 3.37%, and it sits 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 7.45%, 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. The standard deviation of VMIAX over the past three years is 15.28% compared to the category average of 13.07%. Looking at the past 5 years, the fund's standard deviation is 15.7% compared to the category average of 12.74%. 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, VMIAX lost 56.1% and underperformed its peer group by 5.41%. This could mean that the fund is a worse choice than comparable funds during a bear market.

Nevertheless, investors should also note that the fund has a 5-year beta of 1.22, which means it is hypothetically more volatile than the market at large. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. VMIAX's 5-year performance has produced a negative alpha of -5.81, which means 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.

As of the last filing date, the mutual fund has 80.87% of its assets in stocks, with an average market capitalization of $48.11 billion. The fund has the heaviest exposure to the following market sectors:

  1. Industrial Cyclical
  2. Non-Durable
Turnover is about 5%, so those in charge of the fund make 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, VMIAX is a no load fund. It has an expense ratio of 0.10% compared to the category average of 1.05%. So, VMIAX is actually cheaper than its peers from a cost perspective.

Investors need to be aware that with this product, the minimum initial investment is $100,000; each subsequent investment needs to be at least $1.

Bottom Line

Overall, Vanguard Materials Index Admiral ( VMIAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard Materials Index Admiral ( VMIAX ) looks like a good potential choice for investors right now.

Your research on the Mid Cap Blend segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.




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