Is Vanguard Small-Cap Index Admiral (VSMAX) a Strong Mutual Fund Pick Right Now?

There are plenty of choices in the Small Cap Blend category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard Small-Cap Index Admiral (VSMAX). VSMAX has no Zacks Mutual Fund Rank, but we have been able to look into other metrics like performance, volatility, and cost.

Objective

Zacks categorizes VSMAX as Small Cap Blend, which is an area packed with options. Usually targeting stocks with market caps of less than $2 billion, a Small Cap Blend mutual fund lets investors diversify their funds among other kinds of small-cap equities. This can help reduce risk found in companies that have a lower stock market valuation.

History of Fund/Manager

VSMAX finds itself in the Vanguard Group family, based out of Malvern, PA. Vanguard Small-Cap Index Admiral debuted in November of 2000. Since then, VSMAX has accumulated assets of about $64.22 billion, according to the most recently available information. The fund's current manager, Kenny Narzikul, has been in charge of the fund since February of 2023.

Performance

Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 7.43%, and is in the middle 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 13.86%, 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. VSMAX's standard deviation over the past three years is 16.9% compared to the category average of 12.86%. The standard deviation of the fund over the past 5 years is 18.67% compared to the category average of 14.49%. This makes the fund more 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. VSMAX has a 5-year beta of 1.05, which means it is likely to be more volatile than the market average. 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. VSMAX has generated a negative alpha over the past five years of -4.85, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Investigating the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is largely on equities that are traded in the United States.

As of the last filing date, the mutual fund has 75.1% of its assets in stocks, which have an average market capitalization of $11.95 billion. The fund has the heaviest exposure to the following market sectors:

• Industrial Cyclical
• Finance
• Technology

With turnover at about 17%, this fund is making fewer trades than the average comparable fund.

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, VSMAX is a no load fund. It has an expense ratio of 0.05% compared to the category average of 0.95%. From a cost perspective, VSMAX is actually cheaper than its peers.

While the minimum initial investment for the product is $3,000, 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

For additional information on the Small Cap Blend 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 VSMAX 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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