There are plenty of choices in the Large Cap Growth category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard Growth Index Investor VIGRX . VIGRX possesses a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.
We classify VIGRX in the Large Cap Growth category, an area rife with potential choices. Large Cap Growth funds invest in many large U.S. companies that are expected to grow much faster compared to other large-cap stocks. To be considered large-cap, companies must have a market cap over $10 billion.
History of Fund/Manager
Vanguard Group is based in Malvern, PA, and is the manager of VIGRX. Vanguard Growth Index Investor made its debut in November of 1992, and since then, VIGRX has accumulated about $3.21 billion in assets, per the most up-to-date date available. Gerard C. O'Reilly is the fund's current manager and has held that role since December of 1994.
Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 14.56%, and is in the middle 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 12.91%, 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. The standard deviation of VIGRX over the past three years is 11.35% compared to the category average of 9.76%. Looking at the past 5 years, the fund's standard deviation is 10.67% compared to the category average of 9.44%. This makes the fund more volatile than its peers over the past half-decade.
One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. In the most recent bear market, VIGRX lost 47.19% and underperformed comparable funds by 1.78%. This makes the fund a possibly worse choice than its peers during a sliding market environment.
Investors should note that the fund has a 5-year beta of 1.05, so it is likely going to be more 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. Over the past 5 years, the fund has a positive alpha of 0.83. This means that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.
Investigating the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is largely on equities that are traded in the United States.
As of the last filing date, the mutual fund has 81.75% of its assets in stocks, with an average market capitalization of $223.89 billion. The fund has the heaviest exposure to the following market sectors:
Turnover is about 8%, so those in charge of the fund make fewer trades than comparable funds.
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, VIGRX is a no load fund. It has an expense ratio of 0.17% compared to the category average of 1.10%. Looking at the fund from a cost perspective, VIGRX is actually cheaper than its peers.
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.
Overall, Vanguard Growth Index Investor has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, Vanguard Growth Index Investor 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 Large Cap Growth, 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.