Is Vanguard Financials Index Admiral (VFAIX) a Strong Mutual Fund Pick Right Now?

If you've been stuck searching for Sector - Finance funds, consider Vanguard Financials Index Admiral (VFAIX) as a possibility. VFAIX has no Zacks Mutual Fund Rank, but we have been able to look into other metrics like performance, volatility, and cost.

Objective

VFAIX is classified in the Sector - Finance segment by Zacks, and this area is full of possibilities. The financial space is notoriously large, complex, and heavily-regulated, and Sector - Finance mutual funds give investors a stable, diversified approach to investing in this industry. These funds can include everything from banks and investment giants to exchanges and insurance companies, though investors should note that interest rates could have a big impact.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VFAIX. Vanguard Financials Index Admiral debuted in January of 2004. Since then, VFAIX has accumulated assets of about $1.25 billion, according to the most recently available information. The fund is currently managed by Kenny Narzikul who has been in charge of the fund since February of 2023.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. VFAIX has a 5-year annualized total return of 15.1%, and it sits in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 15.9%, which places it in the top third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

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. VFAIX's standard deviation over the past three years is 16.75% compared to the category average of 21%. The fund's standard deviation over the past 5 years is 18.98% compared to the category average of 21.45%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

With a 5-year beta of 0.98, the fund is likely to be as volatile as the market average. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. The fund has produced a positive alpha over the past 5 years of 0.96, which shows that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

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, VFAIX is a no load fund and it has an expense ratio of 0.09%.

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.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

For additional information on this product, or to compare it to other mutual funds in the Sector - Finance, make sure to go to www.zacks.com/funds/mutual-funds 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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This article originally published on Zacks Investment Research (zacks.com).

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