Is VWALX a Strong Bond Fund Right Now?
Muni - Bonds fund seekers should consider taking a look at Vanguard High-Yield Tax-Exempt Admiral (VWALX). VWALX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We classify VWALX in the Muni - Bonds category, an area rife with potential choices. Muni - Bonds funds focus their investments on debt securities issued by state and local governments. These are typically used to pay for the construction of infrastructure, the operation of public schools, and other municipal functions. These securities can come in the form of revenue bonds, which are backed by taxes, as well as " general obligation " bonds that are not backed by a defined source. Investors are usually interested that come with most municipal bonds, which can be especially important for those in higher tax brackets.
History of Fund/Manager
Vanguard Group is based in Malvern, PA, and is the manager of VWALX. Vanguard High-Yield Tax-Exempt Admiral made its debut in November of 2001, and since then, VWALX has accumulated about $15.68 billion in assets, per the most up-to-date date available. Mathew Kiselak is the fund's current manager and has held that role since July of 2010.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of 4.72%, 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 6.2%, 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 VWALX over the past three years is 5.66% compared to the category average of 10.13%. Over the past 5 years, the standard deviation of the fund is 5.19% compared to the category average of 8.61%. This makes the fund less volatile than its peers over the past half-decade.
With a beta of 0.72, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, VWALX has a positive alpha of 0.57, which measures performance on a risk-adjusted basis.
Ratings
Investors should also consider a bond's rating, which is a grade ( 'AAA' to 'D' ) given to a bond that indicates its credit quality. With this letter scale in mind, VWALX has 26.63% in high quality bonds rated at least 'AA' or higher, while 68.97% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of A, and focuses on high quality securities.
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, VWALX is a no load fund. It has an expense ratio of 0.09% compared to the category average of 0.80%. From a cost perspective, VWALX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $50,000 and that each subsequent investment needs to be at $1.
Bottom Line
Overall, Vanguard High-Yield Tax-Exempt Admiral ( VWALX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.
Don't stop here for your research on Muni - Bonds 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 VWALX to its peers as well for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.
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