Technology

Is Vanguard Tax-Managed Small Cap Investor (VTMSX) a Strong Mutual Fund Pick Right Now?

If you've been stuck searching for Small Cap Blend funds, consider Vanguard Tax-Managed Small Cap Investor (VTMSX) as a possibility. VTMSX possesses 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 VTMSX 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 based in Malvern, PA, and is the manager of VTMSX. The Vanguard Tax-Managed Small Cap Investor made its debut in April of 1999 and VTMSX has managed to accumulate roughly $8.45 billion in assets, as of the most recently available information. The fund's current manager, William Coleman, has been in charge of the fund since April of 2016.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 15.8%, and is 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 12.59%, 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 VTMSX over the past three years is 25.74% compared to the category average of 20.52%. Looking at the past 5 years, the fund's standard deviation is 21.35% compared to the category average of 16.84%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 1.24, which means it is hypothetically 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. VTMSX has generated a negative alpha over the past five years of -3.69, demonstrating 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, VTMSX is a no load fund. It has an expense ratio of 0.09% compared to the category average of 1.11%. Looking at the fund from a cost perspective, VTMSX is actually cheaper than its peers.

This fund requires a minimum initial investment of $10,000, and each subsequent investment should be at least $1.

Bottom Line

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

Want even more information about VTMSX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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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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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