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Is Vanguard Tax-Managed Small Cap Investor (VTMSX) a Strong Mutual Fund Pick Right Now?

Mutual Fund Report for VTMSX

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This story originally appeared on Zacks

On the lookout for a Mutual Fund Equity Report fund? Starting with Vanguard Tax-Managed Small Cap Investor (VTMSX) is one possibility. VTMSX bears a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

- Zacks

History of Fund/Manager

Vanguard Group is responsible for VTMSX, and the company is based out of Malvern, PA. The Vanguard Tax-Managed Small Cap Investor made its debut in April of 1999 and VTMSX has managed to accumulate roughly $8.27 billion in assets, as of the most recently available information. The fund is currently managed by William Coleman who has been in charge of the fund since April of 2016.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 12.17%, 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 13.53%, 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. Over the past three years, VTMSX's standard deviation comes in at 24.85%, compared to the category average of 20.41%. The standard deviation of the fund over the past 5 years is 20.74% compared to the category average of 16.82%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

The fund has a 5-year beta of 1.17, so investors should note that it is hypothetically more volatile than the market at large. 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. Over the past 5 years, the fund has a negative alpha of -6.61. 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 mostly on equities that are traded in the United States.

Currently, this mutual fund is holding 79.1% stock in stocks, and these companies have an average market capitalization of $2.84 billion. The fund has the heaviest exposure to the following market sectors:

  1. Finance
  2. Industrial Cyclical
  3. Technology

Turnover is about 10%, so those in charge of the fund make fewer trades than the average comparable fund.

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, VTMSX is a no load fund. It has an expense ratio of 0.09% compared to the category average of 1.10%. From a cost perspective, VTMSX is actually cheaper than its peers.

Investors should also note that the minimum initial investment for the product is $10,000 and that each subsequent investment needs to be at $1.

Bottom Line

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

Want even more information about VTMSX? 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. 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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