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Is Vanguard Emerging Markets Stock Index Admiral (VEMAX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research

Looking for a Non US - Equity fund? You may want to consider Vanguard Emerging Markets Stock Index Admiral (VEMAX) as a possible option. VEMAX has no Zacks Mutual Fund Rank, but we have been able to look into other metrics like performance, volatility, and cost.

Objective

VEMAX is classified in the Non US - Equity area by Zacks, and this segment is full of potential. Non US - Equity funds focus their investments on companies outside of the United States, which is an important distinction since global mutual funds tend to keep a sizable portion of their portfolio based in the United States. Most of these funds will allocate across emerging and developed markets, and can often extend across cap levels too.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VEMAX. The Vanguard Emerging Markets Stock Index Admiral made its debut in June of 2006 and VEMAX has managed to accumulate roughly $13.76 billion in assets, as of the most recently available information. The fund's current manager, Michael Perre, has been in charge of the fund since August of 2008.

Performance

Of course, investors look for strong performance in funds. VEMAX has a 5-year annualized total return of 0.22% and is in the middle 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 5.22%, 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 10.12%, the standard deviation of VEMAX over the past three years is 13.38%. Over the past 5 years, the standard deviation of the fund is 15.39% compared to the category average of 10.41%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. VEMAX lost 62.63% in the most recent bear market and underperformed comparable funds by 4%. These results could imply that the fund is a worse choice than its peers during a sliding market environment.

Even still, the fund has a 5-year beta of 0.87, so investors should note that it is hypothetically less volatile than the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. VEMAX has generated a negative alpha over the past five years of -7.47, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

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, VEMAX is a no load fund. It has an expense ratio of 0.14% compared to the category average of 1.20%. So, VEMAX 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 $1.

Bottom Line

Don't stop here for your research on Non US - Equity funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare VEMAX to its peers 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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