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Is Vanguard Financials Index Admiral (VFAIX) a Strong Mutual Fund Pick Right Now?

Mutual Fund Report for VFAIX

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This story originally appeared on Zacks

There are plenty of choices in the Sector - Finance category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard Financials Index Admiral (VFAIX). The fund does not have a Zacks Mutual Fund Rank, though we have been able to explore other metrics like performance, volatility, and cost.

- Zacks

Objective

VFAIX is part of the Sector - Finance section, which boasts an array of other possible selections. Sector - Finance funds offer a stable, diversified approach to investing that focuses on the financial industry, an infamously large, complex, and heavily-regulated space. Funds here can include insurance companies and exchanges, as well as banks and investment giants. Investors should note that interest rates may also impact players in this market.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VFAIX. The Vanguard Financials Index Admiral made its debut in January of 2004 and VFAIX has managed to accumulate roughly $787.90 million in assets, as of the most recently available information. William Coleman is the fund's current manager and has held that role since December of 2015.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of 15.28%, and it sits in the top 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 11.04%, which places it in the middle 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 VFAIX over the past three years is 25.15% compared to the category average of 16.69%. The standard deviation of the fund over the past 5 years is 21.22% compared to the category average of 13.97%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 1.2, so it is likely going to be 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 negative alpha of -3.87. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Exploring 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.

The mutual fund currently has 85.79% of its holdings in stocks, and these companies have an average market capitalization of $138.25 billion. Turnover is 2%, which means this fund makes fewer trades than comparable funds.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, VFAIX is a no load fund. It has an expense ratio of 0.10% compared to the category average of 1.54%. Looking at the fund from a cost perspective, VFAIX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $100,000; each subsequent investment needs to be at least $1.

Bottom Line

Want even more information about VFAIX? 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. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.



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