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Is Vanguard Information Technology Index Admiral (VITAX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research
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If investors are looking at the Sector - Tech fund category, Vanguard Information Technology Index Admiral (VITAX) could be a potential option. VITAX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

The world of Sector - Tech funds is an area filled with options, and VITAX is one of them. Sector - Tech mutual funds allow investors to own a stake in a notoriously volatile sector with a much more diversified approach. Tech companies can be in any number of industries such as semiconductors, software, internet, networking just to name a few.

History of Fund/Manager

VITAX finds itself in the Vanguard Group family, based out of Malvern, PA. Vanguard Information Technology Index Admiral made its debut in January of 2004, and since then, VITAX has accumulated about $1.73 billion in assets, per the most up-to-date date available. Walter Nejman is the fund's current manager and has held that role since December of 2015.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 14.66%, and it sits in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 16.92%, 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 16.24%, the standard deviation of VITAX over the past three years is 15.34%. The standard deviation of the fund over the past 5 years is 14.49% compared to the category average of 15.86%. This makes the fund less 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. In the most recent bear market, VITAX lost 50.65% and outperformed its peer group by 2.66%. This means that the fund could possibly be a better choice than its peers during a down market environment.

Even still, the fund has a 5-year beta of 1.14, so investors should note that it is hypothetically more volatile than the market at large. 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. Over the past 5 years, the fund has a positive alpha of 5.03. This means that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

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 principally on equities that are traded in the United States.

As of the last filing date, the mutual fund has 77.37% of its assets in stocks, and these companies have an average market capitalization of $387.58 billion. This fund's turnover is about 7%, so the fund managers are making fewer trades than its comparable peers.

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, VITAX is a no load fund. It has an expense ratio of 0.10% compared to the category average of 1.31%. So, VITAX is actually cheaper than its peers from a cost perspective.

Investors should also note that the minimum initial investment for the product is $100,000 and that each subsequent investment needs to be at $1.

Bottom Line

Overall, Vanguard Information Technology Index Admiral ( VITAX ) has a high Zacks Mutual Fund rank, strong performance, average downside risk, and lower fees compared to its peers.

Your research on the Sector - Tech 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. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.


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