Is Vanguard Tax-Managed Balanced Fund (VTMFX) a Strong Mutual Fund Pick Right Now?

If you have been looking for Allocation Balanced funds, a place to start could be Vanguard Tax-Managed Balanced Fund (VTMFX). VTMFX bears a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

VTMFX is classified in the Allocation Balanced segment by Zacks, which is an area full of possibilities. Here, investors are able to get a good head start with diversified mutual funds, and play around with core holding options for a portfolio of funds. Allocation Balanced funds look to invest across a balance of asset types, like stocks, bonds, and cash, though including precious metals or commodities is not unusual; these funds are mostly categorized by their respective asset allocation.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VTMFX. Vanguard Tax-Managed Balanced Fund made its debut in September of 1994, and since then, VTMFX has accumulated about $11.76 billion in assets, per the most up-to-date date available. The fund's current manager is a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 7.55%, and it sits 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 12.74%, 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. VTMFX's standard deviation over the past three years is 7.53% compared to the category average of 7.05%. Looking at the past 5 years, the fund's standard deviation is 9.34% compared to the category average of 8.44%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

The fund has a 5-year beta of 0.61, so investors should note that 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. The fund has produced a negative alpha over the past 5 years of -2.32, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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, VTMFX is a no load fund. It has an expense ratio of 0.09% compared to the category average of 0.75%. So, VTMFX is actually cheaper than its peers from a cost perspective.

Investors should also note that the minimum initial investment for the product is $10,000 and that each subsequent investment needs to be at $1.

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

Bottom Line

Overall, Vanguard Tax-Managed Balanced Fund ( VTMFX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard Tax-Managed Balanced Fund ( VTMFX ) looks like a good potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Allocation Balanced, 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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