There are plenty of choices in the Allocation Balanced category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard Balanced Index Admiral (VBIAX). VBIAX has no Zacks Mutual Fund Rank, but we have been able to look into other metrics like performance, volatility, and cost.
The world of Zacks' Allocation Balanced funds is an area filled with options, such as VBIAX. These funds like to invest in a variety of asset types, finding a balance between stocks, bonds, cash, and sometimes even precious metals and commodities; they are mostly categorized by their respective asset allocation. For investors, Allocation Balanced funds can provide an entry point into diversified mutual funds, and present core holding options for a portfolio of funds.
History of Fund/Manager
Vanguard Group is based in Malvern, PA, and is the manager of VBIAX. Vanguard Balanced Index Admiral debuted in November of 2000. Since then, VBIAX has accumulated assets of about $31.34 billion, according to the most recently available information. The fund is currently managed by a team of investment professionals.
Obviously, what investors are looking for in these funds is strong performance relative to their peers. VBIAX has a 5-year annualized total return of 7.89% 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 8.75%, 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. Over the past three years, VBIAX's standard deviation comes in at 7.44%, compared to the category average of 8.61%. The standard deviation of the fund over the past 5 years is 7.32% compared to the category average of 8.84%. This makes the fund less volatile than its peers over the past half-decade.
Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. In VBIAX's case, the fund lost 32.5% in the most recent bear market and outperformed its peer group by 4%. This means that the fund could possibly be a better choice than its peers during a down 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. VBIAX has a 5-year beta of 0.6, which means it is likely to be less volatile than the market average. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. The fund has produced a positive alpha over the past 5 years of 0.62, which shows that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.
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, VBIAX is a no load fund. It has an expense ratio of 0.07% compared to the category average of 0.89%. From a cost perspective, VBIAX is actually cheaper than its peers.
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.
For additional information on the Allocation Balanced area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into VBIAX too 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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