If you're looking for an Index fund category, then a possible option is Vanguard Total Stock Market Index Investor (VTSMX). While this fund is not tracked by the Zacks Mutual Fund Rank, we were able to examine other factors like performance, volatility, and cost.
History of Fund/Manager
Vanguard Group is based in Malvern, PA, and is the manager of VTSMX. Since Vanguard Total Stock Market Index Investor made its debut in April of 1992, VTSMX has garnered more than $130.90 billion in assets. The fund's current manager, Gerard C. O'Reilly (NASDAQ:ORLY), has been in charge of the fund since December of 1994.
Performance
Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 10.8%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 12.98%, 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. Compared to the category average of 8.94%, the standard deviation of VTSMX over the past three years is 12.43%. The fund's standard deviation over the past 5 years is 12.24% compared to the category average of 9.31%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
It's always important to be aware of the downsides to any future investment, so one should not discount the risks that come with this segment. In the most recent bear market, VTSMX lost 50.89% and underperformed its peer group by 5%. This could mean that the fund is a worse choice than comparable funds during a bear market.
Even still, the fund has a 5-year beta of 1.02, so investors should note that it is hypothetically as volatile as the market at large. 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. The fund has produced a negative alpha over the past 5 years of -0.62, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Holdings
Exploring 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 mostly on equities that are traded in the United States.
Right now, 98.43% of this mutual fund's holdings are stocks, with an average market capitalization of $173.12 billion. The fund has the heaviest exposure to the following market sectors:
- Technology
- Finance
With turnover at about 3%, this fund is making fewer trades than its comparable peers.
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, VTSMX is a no load fund. It has an expense ratio of 0.14% compared to the category average of 0.76%. VTSMX is actually cheaper than its peers when you consider factors like cost.
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.
Bottom Line
For additional information on this product, or to compare it to other mutual funds in the Index, make sure to go to www.zacks.com/funds/mutual-funds for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.
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Zacks Investment Research