Is Vanguard Diversified Equity Investor (VDEQX) a Strong Mutual Fund Pick Right Now?
Large Cap Blend fund seekers should consider taking a look at Vanguard Diversified Equity Investor (VDEQX). VDEQX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We note that VDEQX is a Large Cap Blend option, an area loaded with different options. More often than not, Large Cap Blend mutual funds invest in companies with a market cap of over $10 billion. Buying stakes in bigger companies offer these funds more stability, and are well-suited for investors with a " buy and hold " mindset. Additionally, blended funds mix large, more established firms into their portfolios, giving investors exposure to value and growth opportunities.
History of Fund/Manager
VDEQX finds itself in the Vanguard Group family, based out of Malvern, PA. Vanguard Diversified Equity Investor made its debut in June of 2005, and since then, VDEQX has accumulated about $1.82 billion in assets, per the most up-to-date date available. William A. Coleman is the fund's current manager and has held that role since February of 2013.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 10.44%, 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 13.38%, 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. Over the past three years, VDEQX's standard deviation comes in at 13.05%, compared to the category average of 12.09%. Looking at the past 5 years, the fund's standard deviation is 12.89% compared to the category average of 12.11%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. VDEQX lost 52.2% in the most recent bear market and underperformed its peer group by 3%. This means that the fund could possibly be a worse choice than its peers during a down market environment.
Nevertheless, investors should also note that the fund has a 5-year beta of 1.06, which means it is hypothetically more volatile than 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. VDEQX's 5-year performance has produced a negative alpha of -1.32, which means 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 principally on equities that are traded in the United States.
Currently, this mutual fund is holding 96.01% stock in stocks and it has a negligible amount of assets in foreign securities. With turnover at about 18%, this fund makes fewer trades than its comparable peers.
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, VDEQX is a no load fund. It has an expense ratio of 0.35% compared to the category average of 0.96%. From a cost perspective, VDEQX is actually cheaper than its peers.
This fund requires a minimum initial investment of $3,000, and each subsequent investment should be at least $1.
Bottom Line
Overall, Vanguard Diversified Equity Investor ( VDEQX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard Diversified Equity Investor ( VDEQX ) looks like a good potential choice for investors right now.
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 VDEQX to its peers as well 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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