Is Vanguard 500 Index Investor (VFINX) a Strong Mutual Fund Pick Right Now?

If you're looking for a Large Cap Blend fund category, then a possible option is Vanguard 500 Index Investor (VFINX). VFINX has no Zacks Mutual Fund Rank, but we have been able to look into other metrics like performance, volatility, and cost.

Objective

VFINX is part of the Large Cap Blend section, an area that boasts an array of many possible options. Large Cap Blend mutual funds most often invest in firms with a market capitalization of $10 billion or more. By investing in bigger companies, these funds offer more stability, and are often well-suited for investors with a 'buy and hold' mindset. Blended funds mix large, established companies into their holdings, which gives investors exposure to both value and growth at the same time.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VFINX. Since Vanguard 500 Index Investor made its debut in August of 1976, VFINX has garnered more than $2.76 billion in assets. The fund's current manager is a team of investment professionals.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 12.7%, and is 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 19.16%, 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. The standard deviation of VFINX over the past three years is 12.39% compared to the category average of 11.54%. The fund's standard deviation over the past 5 years is 15.42% compared to the category average of 13.71%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 1, which means it is hypothetically as volatile as the market at large. 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. VFINX's 5-year performance has produced a negative alpha of -0.17, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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, VFINX is a no load fund. It has an expense ratio of 0.14% compared to the category average of 0.86%. Looking at the fund from a cost perspective, VFINX is actually cheaper than its peers.

This fund requires a minimum initial investment of $0, while there is no minimum for each subsequent investment.

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

Bottom Line

Don't stop here for your research on Large Cap Blend 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 VFINX to its peers as well for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.

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