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Is Vanguard Equity Income Investor (VEIPX) a Strong Mutual Fund Pick Right Now?

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Large Cap Value fund seekers should consider taking a look at Vanguard Equity Income Investor (VEIPX - Free Report) . VEIPX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

VEIPX 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 VEIPX. Vanguard Equity Income Investor made its debut in March of 1988, and since then, VEIPX has accumulated about $4.99 billion in assets, per the most up-to-date date available. The fund's current manager is a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of 7.51%, 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 8.59%, 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. VEIPX's standard deviation over the past three years is 9.93% compared to the category average of 10.24%. The standard deviation of the fund over the past 5 years is 10.19% compared to the category average of 10.12%. 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 VEIPX's case, the fund lost 48.87% in the most recent bear market and outperformed its peer group by 1.86%. This means that the fund could possibly be a better choice than its peers during a down market environment.

Nevertheless, with a 5-year beta of 0.89, the fund is likely to be less volatile than the market average. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. The fund has produced a negative alpha over the past 5 years of -0.11, which shows that 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.

Right now, 78.53% of this mutual fund's holdings are stocks, which have an average market capitalization of $142.68 billion. The fund has the heaviest exposure to the following market sectors:

  1. Finance
  2. Technology
  3. Non-Durable
  4. Industrial Cyclical
  5. Health
With turnover at about 37%, this fund is making fewer trades than its comparable peers.

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, VEIPX is a no load fund. It has an expense ratio of 0.27% compared to the category average of 1%. VEIPX is actually cheaper than its peers when you consider factors like cost.

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 Equity Income Investor ( VEIPX ) has a high Zacks Mutual Fund rank, strong performance, average downside risk, and lower fees compared to its peers.

For additional information on the Large Cap Value 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 VEIPX too 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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