Is Vanguard Target Retirement Income Fund (VTINX) a Strong Mutual Fund Pick Right Now?

If you've been stuck searching for Allocation Balanced funds, consider Vanguard Target Retirement Income Fund (VTINX) as a possibility. While this fund is not tracked by the Zacks Mutual Fund Rank, we were able to examine other factors like performance, volatility, and cost.

Objective

The world of Zacks' Allocation Balanced funds is an area filled with options, such as VTINX. These funds like to invest in a variety of asset types, finding a balance between stocks, bonds, cash, and sometimes even precious metals and commodities; they are mostly categorized by their respective asset allocation. For investors, Allocation Balanced funds can provide an entry point into diversified mutual funds, and present core holding options for a portfolio of funds.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VTINX. Vanguard Target Retirement Income Fund debuted in October of 2003. Since then, VTINX has accumulated assets of about $36.71 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 carries a 5-year annualized total return of 4.23%, and is 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 9.49%, which places it in the middle 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. The standard deviation of VTINX over the past three years is 5.35% compared to the category average of 6.05%. The standard deviation of the fund over the past 5 years is 6.98% compared to the category average of 7.3%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 0.41, which means it is hypothetically less volatile than the market at large. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. With a negative alpha of -3.46, managers in this portfolio find it difficult to pick 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, VTINX is a no load fund. It has an expense ratio of 0.08% compared to the category average of 0.35%. Looking at the fund from a cost perspective, VTINX is actually cheaper than its peers.

While the minimum initial investment for the product is $1,000, 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

This could just be the start of your research on VTINX in the Allocation Balanced category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.

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This article originally published on Zacks Investment Research (zacks.com).

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