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Is Vanguard Tax-Managed Balanced Fund (VTMFX) a Strong Mutual Fund Pick Right Now?

Mutual Fund Report for VTMFX

This story originally appeared on Zacks

If you've been stuck searching for Allocation Balanced funds, consider Vanguard Tax-Managed Balanced Fund (VTMFX) as a possibility. VTMFX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

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VTMFX is one of many Zacks' Allocation Balanced mutual funds to pick from. Allocation Balanced funds seek to invest in a balance of asset types, like stocks, bonds, and cash, though including precious metals or commodities is not unusual; these funds are mostly categorized by their respective asset allocation. Investors utilize Allocation Balanced funds as a way to get a good start with diversified mutual funds, as well as for core holdings in a portfolio of funds.

History of Fund/Manager

Vanguard Group is responsible for VTMFX, and the company is based out of Malvern, PA. Vanguard Tax-Managed Balanced Fund debuted in September of 1994. Since then, VTMFX has accumulated assets of about $8.08 billion, according to the most recently available information. A team of investment professionals is the fund's current manager.


Investors naturally seek funds with strong performance. VTMFX has a 5-year annualized total return of 10.15% and is 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 11.7%, 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 9.82%, the standard deviation of VTMFX over the past three years is 9.76%. Over the past 5 years, the standard deviation of the fund is 7.86% compared to the category average of 7.85%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

The fund has a 5-year beta of 0.5, so investors should note that 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. VTMFX's 5-year performance has produced a positive alpha of 0.75, which means managers in this portfolio are skilled in picking 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, VTMFX is a no load fund. It has an expense ratio of 0.09% compared to the category average of 0.89%. Looking at the fund from a cost perspective, VTMFX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $10,000; each subsequent investment needs to be at least $1.

Bottom Line

Overall, Vanguard Tax-Managed Balanced Fund ( VTMFX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard Tax-Managed Balanced Fund ( VTMFX ) looks like a good potential choice for investors right now.

This could just be the start of your research on VTMFXin the Allocation Balanced category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well 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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