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Is Vanguard Precious Metals & Mining (VGPMX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research

If you have been looking for Sector - Precious Metal funds, it would not be wise to start your search with Vanguard Precious Metals & Mining (VGPMX). VGPMX has a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

The world of Sector - Precious Metal funds is an area filled with options, such as VGPMX. Usually, Sector - Precious Metal mutual funds invest in stocks with a focus on the mining and production of precious metals like gold, silver, platinum, and palladium. Here, stocks often trade as leveraged bets of the underlying commodity, meaning they're tied to the metal's prices and can be volatile.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VGPMX. Vanguard Precious Metals & Mining made its debut in May of 1984, and since then, VGPMX has accumulated about $1.40 billion in assets, per the most up-to-date date available. Jamie J. Horvat is the fund's current manager and has held that role since February of 2014.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of -4.89%, 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 8.53%, 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 36.35%, the standard deviation of VGPMX over the past three years is 32.53%. Over the past 5 years, the standard deviation of the fund is 29.85% compared to the category average of 35.94%. 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. VGPMX lost 64.02% in the most recent bear market and underperformed its peer group by 28.19%. This means that the fund could possibly be a worse choice than its peers during a down market environment.

Nevertheless, investors should also note that the fund has a 5-year beta of 0.54, which means it is hypothetically less volatile than the market at large. 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. VGPMX has generated a negative alpha over the past five years of -6.83, 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, VGPMX is a no load fund. It has an expense ratio of 0.31% compared to the category average of 1.37%. So, VGPMX is actually cheaper than its peers from a cost perspective.

Investors should also note that the minimum initial investment for the product is $3,000 and that each subsequent investment needs to be at $1.

Bottom Line

Overall, Vanguard Precious Metals & Mining ( VGPMX ) has a low Zacks Mutual Fund rank, strong performance, better downside risk, and lower fees compared to its peers.

Want even more information about VGPMX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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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