Is Vanguard Total Bond Market Index Institutional (VBTIX) a Strong Mutual Fund Pick Right Now?

Any investors who are searching for Index funds should take a look at Vanguard Total Bond Market Index Institutional (VBTIX). VBTIX has no Zacks Mutual Fund Rank, but we have been able to look into other metrics like performance, volatility, and cost.

History of Fund/Manager

VBTIX finds itself in the Vanguard Group family, based out of Malvern, PA. Since Vanguard Total Bond Market Index Institutional made its debut in September of 1995, VBTIX has garnered more than $45.46 billion in assets. Joshua Barrickman is the fund's current manager and has held that role since February of 2013.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of -0.36%, and it sits 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 4.57%, 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. Compared to the category average of 10.52%, the standard deviation of VBTIX over the past three years is 6.03%. The fund's standard deviation over the past 5 years is 6.23% compared to the category average of 11.78%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 1, so it is likely going to be as volatile as the market at large. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. Over the past 5 years, the fund has a negative alpha of -0.08. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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, VBTIX is a no load fund. It has an expense ratio of 0.03% compared to the category average of 0.85%. VBTIX is actually cheaper than its peers when you consider factors like cost.

While the minimum initial investment for the product is $5.00 million, 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

For additional information on this product, or to compare it to other mutual funds in the Index, make sure to go to www.zacks.com/funds/mutual-funds 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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