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Is Vanguard 500 Index Admiral (VFIAX) a Strong Mutual Fund Pick Right Now?

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Any investors who are searching for Index funds should take a look at Vanguard 500 Index Admiral (VFIAX - Free Report) . VFIAX has no Zacks Mutual Fund Rank, but we have been able to look into other metrics like performance, volatility, and cost.

History of Fund/Manager

VFIAX finds itself in the Vanguard Group family, based out of Malvern, PA. Vanguard 500 Index Admiral made its debut in November of 2000, and since then, VFIAX has accumulated about $319.20 billion in assets, per the most up-to-date date available. The fund is currently managed by Donald M. Butler who has been in charge of the fund since April of 2016.

Performance

Of course, investors look for strong performance in funds. VFIAX has a 5-year annualized total return of 12.34% and it sits in the top 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 14.5%, 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, VFIAX's standard deviation comes in at 12.14%, compared to the category average of 8.53%. The standard deviation of the fund over the past 5 years is 11.85% compared to the category average of 9.11%. 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 VFIAX's case, the fund lost 50.91% in the most recent bear market and underperformed its peer group by 8%. This means that the fund could possibly be a worse choice than its peers during a down market environment.

Nevertheless, with a 5-year beta of 1, the fund is likely to be as volatile as the market average. 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. VFIAX has generated a negative alpha over the past five years of -0.03, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Exploring 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 mostly on equities that are traded in the United States.

As of the last filing date, the mutual fund has 76.27% of its assets in stocks, which have an average market capitalization of $232.09 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Finance
  3. Non-Durable
Turnover is 8%, which means, on average, the fund makes fewer trades than the average comparable fund.

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, VFIAX is a no load fund. It has an expense ratio of 0.04% compared to the category average of 0.85%. So, VFIAX is actually cheaper than its peers from a cost perspective.

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

For additional information on the Index 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 VFIAX too for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.


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