Is VWEHX a Strong Bond Fund Right Now?

Any investors hoping to find a High Yield - Bonds fund could think about starting with Vanguard High-Yield Corporate Investor (VWEHX). VWEHX carries a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.

Objective

VWEHX is part of the High Yield - Bonds section, which is a segment that boasts many possible options. Often referred to as "junk" bonds,High Yield - Bonds funds sit below investment grade, meaning they are at a high default risk compared to their investment grade peers. However, one advantage to junk bonds is that they generally pay out higher yields while posing similar interest rate risks to their investment grade counterparts.

History of Fund/Manager

VWEHX is a part of the Vanguard Group family of funds, a company based out of Malvern, PA. Since Vanguard High-Yield Corporate Investor made its debut in December of 1978, VWEHX has garnered more than $2.98 billion in assets. The fund's current manager, Michael Chang, has been in charge of the fund since August of 2022.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 4.11%, and is in the middle 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 9.06%, which places it in the middle 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. Over the past three years, VWEHX's standard deviation comes in at 4.44%, compared to the category average of 7.8%. Looking at the past 5 years, the fund's standard deviation is 6.51% compared to the category average of 9.33%. 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. VWEHX has a modified duration of 2.86, which suggests that the fund will decline 2.86% for every hundred-basis-point increase in interest rates.

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, VWEHX is a no load fund and it has an expense ratio of 0.22%.

While the minimum initial investment for the product is $3,000, 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

With a rank of 'hold' we aren't getting a good signal one way or another on VWEHX. That is why it might be a good idea to consider other items, such as the fund's expense ratio of .22%, and how this compares to other potential options being considered for investment. If cheaper, it might make a decent choice, but a more expensive fund might be worth avoiding. Just make sure to pay attention to its rank in case it shifts in the near future.

Your research on the High Yield - Bonds 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. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.

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This article originally published on Zacks Investment Research (zacks.com).

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