Technology

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

Any investors hoping to find an Allocation Balanced fund could think about starting with Vanguard Tax-Managed Balanced Fund (VTMFX). VTMFX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine 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. The Vanguard Tax-Managed Balanced Fund made its debut in September of 1994 and VTMFX has managed to accumulate roughly $5.34 billion in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. VTMFX has a 5-year annualized total return of 7.2% 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 7.8%, which places it in the top 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. VTMFX's standard deviation over the past three years is 5.91% compared to the category average of 7.36%. The standard deviation of the fund over the past 5 years is 5.71% compared to the category average of 7.65%. This makes the fund less 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 VTMFX's case, the fund lost 25.22% in the most recent bear market and outperformed its peer group by 11%. This means that the fund could possibly be a better choice than its peers during a down market environment.

Nevertheless, investors should also note that the fund has a 5-year beta of 0.46, 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 positive alpha of 1.34, managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Examining 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 principally on equities that are traded in the United States.

This fund is currently holding about 76.58% stock in stocks, which have an average market capitalization of $189.29 billion. The fund has the heaviest exposure to the following market sectors:

  1. Other
  2. Technology

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 0.89%. Looking at the fund from a cost perspective, VTMFX is actually cheaper than its peers.

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.

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, this fund looks like a good potential choice for investors right now.

Don't stop here for your research on Allocation Balanced funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare VTMFX to its peers as well for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.


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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.

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