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Is Vanguard Health Care Investor (VGHCX) a Strong Mutual Fund Pick Right Now?

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Having trouble finding a Sector - Health fund? Vanguard Health Care Investor (VGHCX - Free Report) is a potential starting point. VGHCX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

The world of Sector - Health funds is an area filled with options, such as VGHCX. Healthcare is one of the biggest sectors of the American economy, and Sector - Health mutual funds provide a great opportunity to invest in this industry. Here, funds can include everything from for-profit hospitals to pharmaceutical companies and medical device manufacturers.

History of Fund/Manager

VGHCX is a part of the Vanguard Group family of funds, a company based out of Malvern, PA. The Vanguard Health Care Investor made its debut in May of 1984 and VGHCX has managed to accumulate roughly $8.31 billion in assets, as of the most recently available information. The fund's current manager, Jean M. Hynes, has been in charge of the fund since May of 2008.

Performance

Investors naturally seek funds with strong performance. VGHCX has a 5-year annualized total return of 9.23% and is 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 2.41%, 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 13.68%, the standard deviation of VGHCX over the past three years is 14.13%. The standard deviation of the fund over the past 5 years is 13.4% compared to the category average of 13.3%. 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, VGHCX lost 31.82% and outperformed its peer group by 1.42%. This might suggest that the fund is a better choice than its peers during a bear market.

Even still, the fund has a 5-year beta of 0.92, so investors should note that it is hypothetically less volatile than the market at large. 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 positive alpha of 1.7. This means that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

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, VGHCX is a no load fund. It has an expense ratio of 0.34% compared to the category average of 1.29%. VGHCX 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 Health Care Investor ( VGHCX ) has a high Zacks Mutual Fund rank, strong performance, average downside risk, and lower fees compared to its peers.

For additional information on this product, or to compare it to other mutual funds in the Sector - Health, make sure to go to www.zacks.com/funds/mutual-funds 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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