Is VCOBX a Strong Bond Fund Right Now?
If you have been looking for Investment Grade Bond - Intermediate funds, a place to start could be Vanguard Core Bond Admiral (VCOBX). VCOBX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
We classify VCOBX in the Investment Grade Bond - Intermediate category, an area rife with potential choices. Investment Grade Bond - Intermediate funds target the middle part of the curve, typically by investing in bonds that mature in more than three years but less than 15 years. At these maturity levels, fixed income instruments have medium duration risk--but they compensate investors with a respectable yield compared to shorter maturity options. Finally, a focus on investment grade ensures that these funds are safer, but yields will be lower than in the junk bond category.
History of Fund/Manager
Vanguard Group is based in Malvern, PA, and is the manager of VCOBX. Since Vanguard Core Bond Admiral made its debut in March of 2016, VCOBX has garnered more than $21.78 billion in assets. The fund's current manager is a team of investment professionals.
Performance
Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 0.48%, 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 4.54%, which places it in the top third during this time-frame.
It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.
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. VCOBX's standard deviation over the past three years is 5.8% compared to the category average of 8.18%. Looking at the past 5 years, the fund's standard deviation is 6.43% compared to the category average of 9.42%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a specific bond's interest rate sensitivity, and is an excellent way to judge how fixed income securities will respond to a shifting rate environment.
If you believe interest rates will rise, this is an important factor to look at. VCOBX has a modified duration of 5.66, which suggests that the fund will decline 5.66% for every hundred-basis-point increase in interest rates.
VCOBX carries a beta of 0.96, 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 0.28, which measures performance on a risk-adjusted basis.Ratings
Investors should also consider a bond's rating, which is a grade "AAA" to "D" given to a bond that indicates its credit quality. With this letter scale in mind, VCOBX has 60.4% in high quality bonds rated at least "AA" or higher, while 33.7% are of medium quality, with ratings of "A" to "BBB". The fund has an average quality of AA, and focuses on high quality securities.Expenses
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, VCOBX is a no load fund. It has an expense ratio of 0.10% compared to the category average of 0.69%. From a cost perspective, VCOBX is actually cheaper than its peers.
While the minimum initial investment for the product is $50,000, investors should also note that each subsequent investment needs to be at least $1.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, Vanguard Core Bond Admiral ( VCOBX ) 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.
Don't stop here for your research on Investment Grade Bond - Intermediate funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare VCOBX to its peers as well for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.
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This article originally published on Zacks Investment Research (zacks.com).
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