Having trouble finding a Muni - Bonds fund? Vanguard Intermediate-Term Tax-Exempt Investor (
VWITX Quick Quote VWITX - Free Report) is a potential starting point. VWITX holds a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance. Objective
We classify VWITX in the Muni - Bonds category, an area rife with potential choices. Muni - Bonds funds focus their investments on debt securities issued by state and local governments. These are typically used to pay for the construction of infrastructure, the operation of public schools, and other municipal functions. These securities can come in the form of revenue bonds, which are backed by taxes, as well as " general obligation " bonds that are not backed by a defined source. Investors are usually interested that come with most municipal bonds, which can be especially important for those in higher tax brackets.
History of Fund/Manager
Vanguard Group is responsible for VWITX, and the company is based out of Malvern, PA. Vanguard Intermediate-Term Tax-Exempt Investor debuted in September of 1977. Since then, VWITX has accumulated assets of about $3.64 billion, according to the most recently available information. James M. D'Arcy is the fund's current manager and has held that role since June of 2013.
Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 3.06%, and it sits in the middle third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 4.38%, 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. Over the past three years, VWITX's standard deviation comes in at 2.27%, compared to the category average of 1.92%. Over the past 5 years, the standard deviation of the fund is 2.75% compared to the category average of -3.21%. This makes the fund more volatile than its peers over the past half-decade.
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 investors who think interest rates will rise, this is an important factor to consider. VWITX has a modified duration of 4.69, which suggests that the fund will decline 4.69% 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. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 4.74% means that a $10,000 investment should result in a yearly payout of $474.
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.
Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks. VWITX carries a beta of 0.65, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a negative alpha of -0.25, 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, VWITX has 70.18% in high quality bonds rated at least 'AA' or higher, while 27.9% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of AA, and focuses on high quality securities.
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, VWITX is a no load fund. It has an expense ratio of 0.17% compared to the category average of 0.55%. Looking at the fund from a cost perspective, VWITX is actually cheaper than its peers.
This fund requires a minimum initial investment of $3,000, and each subsequent investment should be at least $1.
Overall, Vanguard Intermediate-Term Tax-Exempt Investor ( VWITX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, worse downside risk, and lower fees, Vanguard Intermediate-Term Tax-Exempt Investor ( VWITX ) looks like a good potential choice for investors right now.
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