If investors are looking at the Allocation Balanced fund category, Vanguard Tax-Managed Balanced Fund (VTMFX) could be a potential option. VTMFX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
The world of Zacks' Allocation Balanced funds is an area filled with options, such as VTMFX. These funds like to invest in a variety of asset types, finding a balance between stocks, bonds, cash, and sometimes even precious metals and commodities; they are mostly categorized by their respective asset allocation. For investors, Allocation Balanced funds can provide an entry point into diversified mutual funds, and present core holding options for a portfolio of funds.
History of Fund/Manager
Vanguard Group is based in Malvern, PA, and is the manager of VTMFX. Vanguard Tax-Managed Balanced Fund made its debut in September of 1994, and since then, VTMFX has accumulated about $12.15 billion in assets, per the most up-to-date date available. A team of investment professionals is the fund's current manager.
Performance
Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 6.46%, and it sits in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 10.78%, 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 7.14%, the standard deviation of VTMFX over the past three years is 7.9%. The standard deviation of the fund over the past 5 years is 9.49% compared to the category average of 8.56%. 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 0.6, so it is likely going to be less volatile than 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 -2.93. This means that 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, VTMFX is a no load fund. It has an expense ratio of 0.09% compared to the category average of 0.74%. Looking at the fund from a cost perspective, VTMFX is actually cheaper than its peers.
While the minimum initial investment for the product is $10,000, 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
Overall, Vanguard Tax-Managed Balanced Fund ( VTMFX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard Tax-Managed Balanced Fund ( VTMFX ) looks like a good potential choice for investors right now.
Your research on the Allocation Balanced 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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Get Your Free (VTMFX): Fund Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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