Is VPAIX a Strong Bond Fund Right Now?

Having trouble finding a Muni - Bonds fund? Vanguard PA Long-Term Tax-Exempt Investor (VPAIX) is a potential starting point. VPAIX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

We classify VPAIX in the Muni - Bonds category, an area rife with potential choices. Muni - Bonds funds focus their investments on debt securities issued by state and local governments. These are typically used to pay for the construction of infrastructure, the operation of public schools, and other municipal functions. These securities can come in the form of revenue bonds, which are backed by taxes, as well as " general obligation " bonds that are not backed by a defined source. Investors are usually interested that come with most municipal bonds, which can be especially important for those in higher tax brackets.

History of Fund/Manager

VPAIX is a part of the Vanguard Group family of funds, a company based out of Malvern, PA. Since Vanguard PA Long-Term Tax-Exempt Investor made its debut in April of 1986, VPAIX has garnered more than $284.03 million in assets. James D'Arcy is the fund's current manager and has held that role since November of 2011.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. VPAIX has a 5-year annualized total return of 0.63% and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 1.64%, 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. Compared to the category average of 10.6%, the standard deviation of VPAIX over the past three years is 8.24%. Looking at the past 5 years, the fund's standard deviation is 7.02% compared to the category average of 9.99%. This makes the fund less volatile than its peers over the past half-decade.

VPAIX carries a beta of 0.83, 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 0.43, 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, VPAIX has 52.1% in high quality bonds rated at least 'AA' or higher, while 42.2% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of A, and focuses on high quality securities.

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, VPAIX is a no load fund. It has an expense ratio of 0.17% compared to the category average of 0.81%. VPAIX 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 considiration. Returns would be less if those were included.

Bottom Line

Overall, Vanguard PA Long-Term Tax-Exempt Investor ( VPAIX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard PA Long-Term Tax-Exempt Investor ( VPAIX ) looks like a good potential choice for investors right now.

For additional information on the Muni - Bonds area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into VPAIX too 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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