Is VFIJX a Strong Bond Fund Right Now?
If investors are looking at the Government Mortgage - Intermediate fund category, Vanguard GNMA Admiral (VFIJX) could be a potential option. VFIJX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
The world of Government Mortgage - Intermediate funds is an area filled with choices, such as VFIJX. A mortgage-backed security (MBS) is a type of asset-backed security that packages mortgages together and then sells off the pooled securities. Government Mortgage - Intermediate funds focus on this market; this fund category presents a medium risk and yield profile, and concentrates on MBS with at least three years to maturity but less than 10.
History of Fund/Manager
Vanguard Group is based in Malvern, PA, and is the manager of VFIJX. The Vanguard GNMA Admiral made its debut in February of 2001 and VFIJX has managed to accumulate roughly $9.23 billion in assets, as of the most recently available information. The fund's current manager, Brian Conroy, has been in charge of the fund since May of 2019.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 0.11%, and it sits in the bottom 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 4.97%, which places it in the bottom 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, VFIJX's standard deviation comes in at 6.73%, compared to the category average of 12.93%. The fund's standard deviation over the past 5 years is 6.39% compared to the category average of 13.37%. 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.
If you believe interest rates will rise, this is an important factor to look at. VFIJX has a modified duration of 5.72, which suggests that the fund will decline 5.72% for every hundred-basis-point increase in interest rates.
With a beta of 1.01, this fund is more volatile than a broad market index of fixed income securities. Taking this into account, VFIJX has a positive alpha of 0.54 , which measures performance on a risk-adjusted basis.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, VFIJX is a no load fund. It has an expense ratio of 0.11% compared to the category average of 0.91%. Looking at the fund from a cost perspective, VFIJX is actually cheaper than its peers.
This fund requires a minimum initial investment of $50,000, and each subsequent investment should 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 GNMA Admiral ( VFIJX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, better downside risk, and lower fees, this fund looks like a great potential choice for investors right now.
Don't stop here for your research on Government Mortgage - 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 VFIJX 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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