Any investors who are searching for Sector - Utilities funds should take a look at Vanguard Utilities Index Admiral (VUIAX). While this fund is not tracked by the Zacks Mutual Fund Rank, we were able to examine other factors like performance, volatility, and cost.
Objective
VUIAX is classified in the Sector - Utilities segment by Zacks, an area full of potential. Sector - Utilities mutual funds focus on companies that provide essential servicessuch as electric power, gas distribution, and water supplyto millions of people on a daily basis. Overall, the utility industry is known for its stability and reduced volatility.
History of Fund/Manager
Vanguard Group is based in Malvern, PA, and is the manager of VUIAX. Vanguard Utilities Index Admiral debuted in January of 2004. Since then, VUIAX has accumulated assets of about $1.27 billion, according to the most recently available information. The fund's current manager, Michael A. Johnson, has been in charge of the fund since August of 2015.
Performance
Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 11.59%, and is 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 12.55%, 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. The standard deviation of VUIAX over the past three years is 10.14% compared to the category average of 9.27%. The standard deviation of the fund over the past 5 years is 11.95% compared to the category average of 10.6%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. In the most recent bear market, VUIAX lost 38.05% and outperformed its peer group by 7%. This means that the fund could possibly be a better choice than its peers during a down market environment.
Nevertheless, with a 5-year beta of 0.22, the fund is likely to be less volatile than the market average. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. With a positive alpha of 9.02, managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.
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, VUIAX is a no load fund. It has an expense ratio of 0.10% compared to the category average of 1.26%. VUIAX is actually cheaper than its peers when you consider factors like cost.
While the minimum initial investment for the product is $100,000, investors should also note that each subsequent investment needs to be at least $1.
Bottom Line
For additional information on the Sector - Utilities 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 VUIAX too for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.
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Zacks Investment Research