If you've been stuck searching for Investment Grade Bond - Long funds, you might want to consider passing on by Vanguard Long-Term Investment-Grade Income Admiral (VWETX) as a possibility. VWETX possesses a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

The world of Investment Grade Bond - Long funds is an area filled with options, such as VWETX. With a focus on bonds that mature in more than 10 years, Investment Grade Bond - Long funds target the long end of the curve. Investors do inherit a higher duration risk with fixed income instruments at this maturity level, but these funds typically provide a higher yield, at least when compared to their short-maturity counterparts. Finally, investors should also note that the focus on investment grade does make these funds safer, but yields will be lower than in the junk bond category.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VWETX. Vanguard Long-Term Investment-Grade Income Admiral debuted in February of 2001. Since then, VWETX has accumulated assets of about $12.27 billion, according to the most recently available information. A team of investment professionals is the fund's current manager.

Performance

Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 5.27%, 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 3.88%, 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. VWETX's standard deviation over the past three years is 6.98% compared to the category average of 6.83%. The fund's standard deviation over the past 5 years is 7.36% compared to the category average of 7.07%. This makes the fund more volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.

If you believe interest rates will rise, this is an important factor to look at. VWETX has a modified duration of 13.4, which suggests that the fund will decline 13.4% for every hundred-basis-point increase in interest rates.

Income

Since income is, of course, a big reason for purchasing a fixed income security, it is always important to consider the fund's average coupon. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 4.3% means that a $10,000 investment should result in a yearly payout of $430.

If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur if rates are lower in the future when compared to the initial purchase date of the bond.

Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks. With a beta of 2.21, this fund is more volatile than a broad market index of fixed income securities. Taking this into account, VWETX has a positive alpha of 0.26, which measures performance on a risk-adjusted basis.

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, VWETX is a no load fund. It has an expense ratio of 0.12% compared to the category average of 0.91%. VWETX is actually cheaper than its peers when you consider factors like cost.

While the minimum initial investment for the product is $50,000, investors should also note that each subsequent investment needs to be at least $1.

Bottom Line

Overall, Vanguard Long-Term Investment-Grade Income Admiral ( VWETX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard Long-Term Investment-Grade Income Admiral ( VWETX ) looks like a somewhat weak choice for investors right now.

Your research on the Investment Grade Bond - Long segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well 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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