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Having trouble finding a Government Bond - Long fund? Vanguard Long-Term Treasury Investor (VUSTX - Free Report) is a potential starting point. VUSTX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
Zacks categorizes VUSTX as Government Bond - Long, which is an area packed with options. In their portfolios, Government Bond - Long funds hold securities issued by the United States' federal government, which are often seen as risk-free assets and described as extremely low-risk from a default perspective. Focusing on the long end of the curve, this fund category results in higher yields, but greater sensitivity to interest rate fluctuations.
History of Fund/Manager
Vanguard Group is responsible for VUSTX, and the company is based out of Malvern, PA. The Vanguard Long-Term Treasury Investor made its debut in May of 1986 and VUSTX has managed to accumulate roughly $934.20 million in assets, as of the most recently available information. Gemma Wright Casparius is the fund's current manager and has held that role since January of 2015.
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 4.65%, and it sits 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 6.85%, 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 VUSTX over the past three years is 10.34% compared to the category average of 15.56%. Over the past 5 years, the standard deviation of the fund is 11.5% compared to the category average of 10.74%. This makes the fund more volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a specific bond's interest rate sensitivity, and is an excellent way to judge how fixed income securities will respond to a shifting rate environment.
For those that believe interest rates will rise, this is an important factor to consider. VUSTX has a modified duration of 17.89, which suggests that the fund will decline 17.89% for every hundred-basis-point increase in interest rates.
Income
We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 3.23% means that a $10,000 investment should result in a yearly payout of $323.
If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur 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. VUSTX carries a beta of 3.18, meaning that the fund is more volatile than a broad market index of fixed income securities. With this in mind, it has a negative alpha of -3.06, which measures performance on a risk-adjusted basis.
Expenses
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, VUSTX is a no load fund. It has an expense ratio of 0.20% compared to the category average of 0.38%. From a cost perspective, VUSTX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $3,000 and that each subsequent investment needs to be at $1.
Bottom Line
Overall, Vanguard Long-Term Treasury Investor ( VUSTX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard Long-Term Treasury Investor ( VUSTX ) looks like a good potential choice for investors right now.
This could just be the start of your research on VUSTXin the Government Bond - Long category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.
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Is VUSTX a Strong Bond Fund Right Now?
Having trouble finding a Government Bond - Long fund? Vanguard Long-Term Treasury Investor (VUSTX - Free Report) is a potential starting point. VUSTX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
Zacks categorizes VUSTX as Government Bond - Long, which is an area packed with options. In their portfolios, Government Bond - Long funds hold securities issued by the United States' federal government, which are often seen as risk-free assets and described as extremely low-risk from a default perspective. Focusing on the long end of the curve, this fund category results in higher yields, but greater sensitivity to interest rate fluctuations.
History of Fund/Manager
Vanguard Group is responsible for VUSTX, and the company is based out of Malvern, PA. The Vanguard Long-Term Treasury Investor made its debut in May of 1986 and VUSTX has managed to accumulate roughly $934.20 million in assets, as of the most recently available information. Gemma Wright Casparius is the fund's current manager and has held that role since January of 2015.
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 4.65%, and it sits 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 6.85%, 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 VUSTX over the past three years is 10.34% compared to the category average of 15.56%. Over the past 5 years, the standard deviation of the fund is 11.5% compared to the category average of 10.74%. This makes the fund more volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a specific bond's interest rate sensitivity, and is an excellent way to judge how fixed income securities will respond to a shifting rate environment.
For those that believe interest rates will rise, this is an important factor to consider. VUSTX has a modified duration of 17.89, which suggests that the fund will decline 17.89% for every hundred-basis-point increase in interest rates.
Income
We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 3.23% means that a $10,000 investment should result in a yearly payout of $323.
If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur 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. VUSTX carries a beta of 3.18, meaning that the fund is more volatile than a broad market index of fixed income securities. With this in mind, it has a negative alpha of -3.06, which measures performance on a risk-adjusted basis.
Expenses
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, VUSTX is a no load fund. It has an expense ratio of 0.20% compared to the category average of 0.38%. From a cost perspective, VUSTX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $3,000 and that each subsequent investment needs to be at $1.
Bottom Line
Overall, Vanguard Long-Term Treasury Investor ( VUSTX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard Long-Term Treasury Investor ( VUSTX ) looks like a good potential choice for investors right now.
This could just be the start of your research on VUSTXin the Government Bond - Long category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.