There are plenty of choices in the Investment Grade Bond - Intermediate category, but where should you start your research? Well, one fund that may not be worth investigating is Vanguard Intermediate-Term Investment-Grade Investor (VFICX). VFICX bears a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.
We classify VFICX in the Investment Grade Bond - Intermediate category, an area rife with potential choices. Investment Grade Bond - Intermediate funds target the middle part of the curve, typically by investing in bonds that mature in more than three years but less than 15 years. At these maturity levels, fixed income instruments have medium duration risk--but they compensate investors with a respectable yield compared to shorter maturity options. Finally, a focus on investment grade ensures that these funds are safer, but yields will be lower than in the junk bond category.
History of Fund/Manager
Vanguard Group is based in Malvern, PA, and is the manager of VFICX. Since Vanguard Intermediate-Term Investment-Grade Investor made its debut in November of 1993, VFICX has garnered more than $2.28 billion in assets. A team of investment professionals is the fund's current manager.
Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 4.9%, and it sits 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 6%, which places it in the top third during this time-frame.
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, VFICX's standard deviation comes in at 4.49%, compared to the category average of 10.41%. The standard deviation of the fund over the past 5 years is 4% compared to the category average of 9.01%. This makes the fund less volatile than its peers over the past half-decade.
With a beta of 1.14, this fund is more volatile than a broad market index of fixed income securities. Taking this into account, VFICX has a positive alpha of 0.43, which measures performance on a risk-adjusted basis.
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, VFICX has 33.24% in high quality bonds rated at least 'AA' or higher, while 60.66% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of A, and focuses on high quality securities.
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, VFICX is a no load fund. It has an expense ratio of 0.20% compared to the category average of 0.81%. So, VFICX is actually cheaper than its peers from a cost perspective.
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.
Overall, Vanguard Intermediate-Term Investment-Grade Investor ( VFICX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.
Your research on the Investment Grade Bond - Intermediate 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. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.
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