Is Vanguard Target Retirement 2035 Fund (VTTHX) a Strong Mutual Fund Pick Right Now?
Are you on the hunt for a Target Date fund? You should think about starting with Vanguard Target Retirement 2035 Fund (VTTHX). VTTHX has no Zacks Mutual Fund Rank, but we have been able to look into other metrics like performance, volatility, and cost.
History of Fund/Manager
Vanguard Group is based in Malvern, PA, and is the manager of VTTHX. Since Vanguard Target Retirement 2035 Fund made its debut in October of 2003, VTTHX has garnered more than $35.80 billion in assets. William A. Coleman is the fund's current manager and has held that role since February of 2013.
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 7.16%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 10.12%, 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, VTTHX's standard deviation comes in at 8.02%, compared to the category average of 7.46%. Over the past 5 years, the standard deviation of the fund is 8.83% compared to the category average of 8.09%. This makes the fund more volatile than its peers over the past half-decade.
Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. VTTHX lost 48.05% in the most recent bear market and underperformed comparable funds by 2.41%. These results could imply that the fund is a worse choice than its peers during a sliding market environment.
Nevertheless, investors should also note that the fund has a 5-year beta of 0.76, which means it is hypothetically less volatile than the market at large. 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. Over the past 5 years, the fund has a negative alpha of -1.68. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
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, VTTHX is a no load fund. It has an expense ratio of 0.14% compared to the category average of 0.47%. From a cost perspective, VTTHX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $1,000 and that each subsequent investment needs to be at $1.
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