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Is USAIX a Strong Bond Fund Right Now?

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·4 min read
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If you've been stuck searching for Investment Grade Bond - Intermediate funds, consider USAA Income Fund (USAIX) as a possibility. USAIX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We classify USAIX 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

Victory is based in Columbus, OH, and is the manager of USAIX. The USAA Income Fund made its debut in March of 1974 and USAIX has managed to accumulate roughly $3.24 billion in assets, as of the most recently available information. The fund's current manager is a team of investment professionals.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 4.67%, and is 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 5.58%, 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 USAIX over the past three years is 5.77% compared to the category average of 12.31%. The standard deviation of the fund over the past 5 years is 4.91% compared to the category average of 10.41%. This makes the fund less volatile than its peers over the past half-decade.

USAIX carries a beta of 1.15, meaning that the fund is more volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 1.3, 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, USAIX has 33.21% in high quality bonds rated at least 'AA' or higher, while 59.5% 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

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, USAIX is a no load fund. It has an expense ratio of 0.50% compared to the category average of 0.79%. So, USAIX 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 $50.

Bottom Line

Overall, USAA Income Fund ( USAIX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

This could just be the start of your research on USAIXin the Investment Grade Bond - Intermediate 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. 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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