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Is Vanguard Extended Market Index Investor (VEXMX) a Strong Mutual Fund Pick Right Now?

Small Cap Blend fund seekers should consider taking a look at Vanguard Extended Market Index Investor (VEXMX). VEXMX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes VEXMX as Small Cap Blend, which is an area packed with options. Usually targeting stocks with market caps of less than $2 billion, a Small Cap Blend mutual fund lets investors diversify their funds among other kinds of small-cap equities. This can help reduce risk found in companies that have a lower stock market valuation.

History of Fund/Manager

Vanguard Group is responsible for VEXMX, and the company is based out of Malvern, PA. Vanguard Extended Market Index Investor made its debut in December of 1987, and since then, VEXMX has accumulated about $1.49 billion in assets, per the most up-to-date date available. Donald M. Butler is the fund's current manager and has held that role since December of 1997.

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 11.25%, and is in the middle third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 16.01%, which places it in the middle 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. Over the past three years, VEXMX's standard deviation comes in at 11.34%, compared to the category average of 9.72%. Looking at the past 5 years, the fund's standard deviation is 11.58% compared to the category average of 9.55%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. In the most recent bear market, VEXMX lost 52.82% and outperformed its peer group by 0.32%. This means that the fund could possibly be a better choice than its peers during a down market environment.

Investors should note that the fund has a 5-year beta of 1.02, so it is likely going to be as volatile as the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. With a negative alpha of -2.41, 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, VEXMX is a no load fund. It has an expense ratio of 0.20% compared to the category average of 1.10%. VEXMX is actually cheaper than its peers when you consider factors like cost.

Investors should also note that the minimum initial investment for the product is $3,000 and that each subsequent investment needs to be at $1.

Bottom Line

Overall, Vanguard Extended Market Index Investor ( VEXMX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on the Small Cap Blend area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds . There, you can see more about the ranking process, and dive even deeper into VEXMX too 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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