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Is VFICX a Strong Bond Fund Right Now?

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Investment Grade Bond - Intermediate fund seekers should consider taking a look at Vanguard Intermediate-Term Investment-Grade Investor (VFICX - Free Report) . VFICX possesses a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We classify VFICX in the Investment Grade Bond - Intermediate category, an area rife with potential choices. Investment Grade Bond - Intermediate funds target the middle part of the curve, typically by investing in bonds that mature in more than three years but less than 15 years. At these maturity levels, fixed income instruments have medium duration risk--but they compensate investors with a respectable yield compared to shorter maturity options. Finally, a focus on investment grade ensures that these funds are safer, but yields will be lower than in the junk bond category.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VFICX. Vanguard Intermediate-Term Investment-Grade Investor made its debut in November of 1993, and since then, VFICX has accumulated about $2.26 billion in assets, per the most up-to-date date available. The fund's current manager, Samuel C. Martinez, has been in charge of the fund since April of 2018.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 3.03%, 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 3.94%, 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 6.47%, the standard deviation of VFICX over the past three years is 3.84%. The fund's standard deviation over the past 5 years is 3.61% compared to the category average of 6.51%. This makes the fund less volatile than its peers over the past half-decade.

This fund has a beta of 1.09, meaning that it is more volatile than a broad market index of fixed income securities. Taking this into account, VFICX has a negative alpha of -0.38, which measures performance on a risk-adjusted basis.

Ratings

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, VFICX has 34.48% in high quality bonds rated at least 'AA' or higher, while 63.67% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of A, and focuses on high quality securities.

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, VFICX is a no load fund. It has an expense ratio of 0.20% compared to the category average of 0.82%. VFICX is actually cheaper than its peers when you consider factors like cost.

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

Overall, Vanguard Intermediate-Term Investment-Grade Investor ( VFICX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard Intermediate-Term Investment-Grade Investor ( VFICX ) looks like a good potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Investment Grade Bond - Intermediate, 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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