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Is VWALX a Strong Bond Fund Right Now?

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Muni - Bonds fund seekers should consider taking a look at Vanguard High-Yield Tax-Exempt Admiral (VWALX - Free Report) . VWALX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.


Zacks categorizes VWALX as Muni - Bonds, which is a segment packed with options. Muni - Bonds funds invest in debt securities issued by states or local municipalities. These are generally used to finance construction of infrastructure, pay for schools, or other government functions. Some are backed by taxes (revenue bonds), while others are " general obligation " and may not be backed by a defined source. Investors usually appreciate the tax benefits that come with many municipal bonds, which are especially impressive for those in high tax brackets.

History of Fund/Manager

Vanguard Group is responsible for VWALX, and the company is based out of Malvern, PA. Vanguard High-Yield Tax-Exempt Admiral made its debut in November of 2001, and since then, VWALX has accumulated about $12.66 billion in assets, per the most up-to-date date available. The fund is currently managed by Mathew M. Kiselak who has been in charge of the fund since July of 2010.


Obviously, what investors are looking for in these funds is strong performance relative to their peers. VWALX has a 5-year annualized total return of 4.7% 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 4.06%, 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 5.98%, the standard deviation of VWALX over the past three years is 3.97%. The standard deviation of the fund over the past 5 years is 3.4% compared to the category average of 6.05%. This makes the fund less volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a given bond's interest rate sensitivity, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.

If you believe interest rates will rise, this is an important factor to look at. VWALX has a modified duration of 7.07, which suggests that the fund will decline 7.07% for every hundred-basis-point increase in interest rates.


It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 5.02% means that a $10,000 investment should result in a yearly payout of $502.

While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.

Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture. VWALX carries a beta of 1.13, meaning that the fund is more volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 0.76, which measures performance on a risk-adjusted basis.


Investors should also consider a bond's rating, which is a grade ( 'AAA' to 'D' ) given to a bond that indicates its credit quality. With this letter scale in mind, VWALX has 25.56% in high quality bonds rated at least 'AA' or higher, while 58.18% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of A, and focuses on high quality securities.


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, VWALX is a no load fund. It has an expense ratio of 0.09% compared to the category average of 0.85%. Looking at the fund from a cost perspective, VWALX is actually cheaper than its peers.

Investors should also note that the minimum initial investment for the product is $50,000 and that each subsequent investment needs to be at $1.

Bottom Line

Overall, Vanguard High-Yield Tax-Exempt Admiral ( VWALX ) has a high Zacks Mutual Fund rank, strong performance, average downside risk, and lower fees compared to its peers.

Want even more information about VWALX? Then go over to and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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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