Is VTAPX a Strong Bond Fund Right Now?

Any investors who are searching for Government Bond - Short funds should take a look at Vanguard Short Term Inflation Protected Security Index Advisor (VTAPX). VTAPX has no Zacks Mutual Fund Rank, but we have been able to look into other metrics like performance, volatility, and cost.

Objective

VTAPX is one of many Government Bond - Short funds to choose from. Often seen as risk-free assets and described as extremely low-risk from a default perspective,Government Bond - Short funds hold securities issued by the federal government of the United States. Focusing on the short end of the curve, this category can result in n lower yields, but less sensitivity to interest rate fluctuations.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VTAPX. Vanguard Short Term Inflation Protected Security Index Advisor debuted in October of 2012. Since then, VTAPX has accumulated assets of about $25.42 billion, according to the most recently available information. Joshua Barrickman is the fund's current manager and has held that role since October of 2012.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. VTAPX has a 5-year annualized total return of 3.35%, 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 5.18%, 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. The standard deviation of VTAPX over the past three years is 2.24% compared to the category average of 8.65%. The fund's standard deviation over the past 5 years is 2.91% compared to the category average of 10.55%. This makes the fund less volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a given bond's interest rate sensitivity, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.

For investors who think interest rates will rise, this is an important factor to consider. VTAPX has a modified duration of 2.47, which suggests that the fund will decline 2.47% for every hundred-basis-point increase in interest rates.

Income

Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 1.08% means that a $10,000 investment should result in a yearly payout of $108.

A higher coupon is good for those seeking a strong level of current income, but it could also pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks.

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, VTAPX is a no load fund. It has an expense ratio of 0.06% compared to the category average of 0.80%. VTAPX is actually cheaper than its peers when you consider factors like cost.

Investors need to be aware that with this product, the minimum initial investment is $3,000; 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

Your research on the Government Bond - Short 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 want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.

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