There are plenty of choices in the Index category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard 500 Index Admiral (VFIAX). While this fund is not tracked by the Zacks Mutual Fund Rank, we were able to examine other factors like performance, volatility, and cost.
History of Fund/Manager
Vanguard Group is responsible for VFIAX, and the company is based out of Malvern, PA. Vanguard 500 Index Admiral debuted in November of 2000. Since then, VFIAX has accumulated assets of about $249.11 billion, according to the most recently available information. The fund's current manager, Donald M. Butler, has been in charge of the fund since April of 2016.
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 10.92%, and is 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 13.98%, 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 8.71%, the standard deviation of VFIAX over the past three years is 11.22%. Over the past 5 years, the standard deviation of the fund is 11.26% compared to the category average of 8.97%. This makes the fund more volatile than its peers over the past half-decade.
Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. In VFIAX's case, the fund lost 50.91% in the most recent bear market and underperformed its peer group by 5.37%. These results could imply that the fund is a worse choice than its peers during a sliding market environment.
Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. VFIAX has a 5-year beta of 1, which means it is likely to be as volatile as the market average. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. VFIAX has generated a negative alpha over the past five years of -0.02, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Investigating 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.
Currently, this mutual fund is holding 98.68% stock in stocks, and these companies have an average market capitalization of $243.58 billion. The fund has the heaviest exposure to the following market sectors:
With turnover at about 6%, this fund is making fewer trades than its comparable peers.
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, VFIAX is a no load fund. It has an expense ratio of 0.04% compared to the category average of 0.74%. So, VFIAX is actually cheaper than its peers from a cost perspective.
This fund requires a minimum initial investment of $3,000, and each subsequent investment should be at least $1.
Your research on the Index 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. 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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