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Is VFIJX a Strong Bond Fund Right Now?

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If you've been stuck searching for Government Mortgage - Intermediate funds, consider Vanguard GNMA Admiral (VFIJX - Free Report) as a possibility. VFIJX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

The world of Government Mortgage - Intermediate funds is an area filled with choices, such as VFIJX. A mortgage-backed security (MBS) is a type of asset-backed security that packages mortgages together and then sells off the pooled securities. Government Mortgage - Intermediate funds focus on this market; this fund category presents a medium risk and yield profile, and concentrates on MBS with at least three years to maturity but less than 10.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VFIJX. Vanguard GNMA Admiral debuted in February of 2001. Since then, VFIJX has accumulated assets of about $17.97 billion, according to the most recently available information. The fund is currently managed by Michael F. Garrett who has been in charge of the fund since June of 2010.

Performance

Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 2.69%, and is in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 3.84%, which places it in the middle 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 VFIJX over the past three years is 2.17% compared to the category average of 6.4%. Over the past 5 years, the standard deviation of the fund is 2.08% compared to the category average of 6.33%. This makes the fund less volatile than its peers over the past half-decade.

VFIJX carries a beta of 0.5, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 0.31, which measures performance on a risk-adjusted basis.

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, VFIJX is a no load fund. It has an expense ratio of 0.11% compared to the category average of 0.79%. From a cost perspective, VFIJX 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 GNMA Admiral ( VFIJX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, Vanguard GNMA Admiral ( VFIJX ) looks like a good potential choice for investors right now.

Your research on the Government Mortgage - Intermediate segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well 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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