If you're looking for an Index fund category, then a possible option is Vanguard Total Bond Market Index Investor (VBMFX). 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
VBMFX finds itself in the Vanguard Group family, based out of Malvern, PA. Vanguard Total Bond Market Index Investor made its debut in December of 1986, and since then, VBMFX has accumulated about $4.51 billion in assets, per the most up-to-date date available. Joshua C. Barrickman is the fund's current manager and has held that role since February of 2013.
Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 1.99%, and is in the bottom 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 1.19%, which places it in the bottom 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. The standard deviation of VBMFX over the past three years is 2.81% compared to the category average of 8.79%. Over the past 5 years, the standard deviation of the fund is 2.85% compared to the category average of 8.68%. This makes the fund less volatile than its peers over the past half-decade.
It's always important to be aware of the downsides to any future investment, so one should not discount the risks that come with this segment. VBMFX gained 9.83% in the most recent bear market and underperformed its peer group by 56.38%. This could mean that the fund is a worse choice than comparable funds during a bear market.
Nevertheless, with a 5-year beta of 1.04, the fund is likely to be more volatile than the market average. 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. With a negative alpha of -0.23, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
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, VBMFX is a no load fund. It has an expense ratio of 0.15% compared to the category average of 0.85%. VBMFX is actually cheaper than its peers when you consider factors like cost.
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.
For additional information on this product, or to compare it to other mutual funds in the Index, make sure to go to www.zacks.com/funds/mutual-funds 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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