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Is VFIIX a Strong Bond Fund Right Now?

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·3 min read
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Having trouble finding a Government Mortgage - Intermediate fund? Vanguard GNMA Investor (VFIIX) is a potential starting point. VFIIX possesses a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

VFIIX is one of many Government Mortgage - Intermediate funds to choose from. Government Mortgage - Intermediate funds focus on the mortgage-backed securities (MBS) market. This market takes mortgages, packages them together, and sells off the pooled securities to investors. This particular category focuses on MBS that usually have at least three years to maturity, but less than 10, giving a medium risk and yield profile to funds here.

History of Fund/Manager

Vanguard Group is responsible for VFIIX, and the company is based out of Malvern, PA. Vanguard GNMA Investor made its debut in June of 1980, and since then, VFIIX has accumulated about $7.70 billion in assets, per the most up-to-date date available. The fund is currently managed by Joseph F. Marvan who has been in charge of the fund since May of 2019.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 2.28%, 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 3.94%, 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, VFIIX's standard deviation comes in at 1.89%, compared to the category average of 8.76%. Looking at the past 5 years, the fund's standard deviation is 1.98% compared to the category average of 7.53%. This makes the fund less volatile than its peers over the past half-decade.

VFIIX carries a beta of 0.37, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 0.05, which measures performance on a risk-adjusted basis.

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, VFIIX is a no load fund. It has an expense ratio of 0.21% compared to the category average of 0.80%. So, VFIIX 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 GNMA Investor ( VFIIX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

Your research on the Government Mortgage - Intermediate 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. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.


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