Is Vanguard Health Care Investor (VGHCX) a Strong Mutual Fund Pick Right Now?

There are plenty of choices in the Sector - Health category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard Health Care Investor (VGHCX). VGHCX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

The world of Sector - Health funds is an area filled with options, such as VGHCX. Healthcare is one of the biggest sectors of the American economy, and Sector - Health mutual funds provide a great opportunity to invest in this industry. Here, funds can include everything from for-profit hospitals to pharmaceutical companies and medical device manufacturers.

History of Fund/Manager

Vanguard Group is responsible for VGHCX, and the company is based out of Malvern, PA. Vanguard Health Care Investor made its debut in May of 1984, and since then, VGHCX has accumulated about $5.35 billion in assets, per the most up-to-date date available. The fund is currently managed by Rebecca Sykes who has been in charge of the fund since May of 2023.

Performance

Of course, investors look for strong performance in funds. VGHCX has a 5-year annualized total return of 5.07%, 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 6.71%, 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. The standard deviation of VGHCX over the past three years is 13.98% compared to the category average of 13.64%. Over the past 5 years, the standard deviation of the fund is 14.2% compared to the category average of 14.83%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. VGHCX has a 5-year beta of 0.53, which means it is likely to be less volatile than the market average. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. VGHCX has generated a negative alpha over the past five years of -3.16, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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, VGHCX is a no load fund. It has an expense ratio of 0.33% compared to the category average of 1.01%. So, VGHCX is actually cheaper than its peers from a cost perspective.

Investors should also note that the minimum initial investment for the product is $3,000 and that each subsequent investment needs to be at $1.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

Overall, Vanguard Health Care Investor ( VGHCX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on the Sector - Health 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 VGHCX too for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.

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

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