Any investors who are searching for Index funds should take a look at Vanguard 500 Index Investor (VFINX). 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 VFINX, and the company is based out of Malvern, PA. Vanguard 500 Index Investor made its debut in August of 1976, and since then, VFINX has accumulated about $4.73 billion in assets, per the most up-to-date date available. Donald M. Butler is the fund's current manager and has held that role since April of 2016.
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 11.19%, and it sits 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 13.2%, 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. VFINX's standard deviation over the past three years is 12.12% compared to the category average of 8.75%. Over the past 5 years, the standard deviation of the fund is 11.99% compared to the category average of 9.24%. 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. VFINX lost 50.97% in the most recent bear market and underperformed its peer group by 5%. This could mean that the fund is a worse choice than comparable funds during a bear market.
Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. VFINX 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. VFINX's 5-year performance has produced a negative alpha of -0.13, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Examining 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 largely on equities that are traded in the United States.
This fund is currently holding about 78.85% stock in stocks, and these companies have an average market capitalization of $209.02 billion. The fund has the heaviest exposure to the following market sectors:
Turnover is 4%, which means, on average, the fund makes fewer trades than the average comparable fund.
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, VFINX is a no load fund. It has an expense ratio of 0.14% compared to the category average of 0.76%. So, VFINX 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.
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