Is VWESX a Strong Bond Fund Right Now?

On the lookout for an Investment Grade Bond - Long fund? Starting with Vanguard Long-Term Investment-Grade Income Investor (VWESX) is one possibility. VWESX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.


VWESX is part of the Investment Grade Bond - Long section, an area loaded with various investment options. Investment Grade Bond - Long funds focus on the long end of the curve, generally with bonds that mature in more than 10 years. Fixed income instruments with this maturity level usually have high duration risk, but they also compensate investors with a heftier yield, at least when compared to their short maturity counterparts. Lastly, the focus on investment grade will make funds here safer, but yields will be lower than in the junk bond category.

History of Fund/Manager

Vanguard Group is responsible for VWESX, and the company is based out of Malvern, PA. The Vanguard Long-Term Investment-Grade Income Investor made its debut in July of 1973 and VWESX has managed to accumulate roughly $4.10 billion in assets, as of the most recently available information. The fund is currently managed by a team of investment professionals.


Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 4.82%, 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 4.2%, 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. Compared to the category average of -4.98%, the standard deviation of VWESX over the past three years is 7.05%. The fund's standard deviation over the past 5 years is 7.2% compared to the category average of -11.71%. This makes the fund more volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.

For those that believe interest rates will rise, this is an important factor to consider. VWESX has a modified duration of 13.29, which suggests that the fund will decline 13.29% for every hundred-basis-point increase in interest rates.


We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 4.8% means that a $10,000 investment should result in a yearly payout of $480.

If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur if rates are lower in the future when compared to the initial purchase date of the bond.

Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks. With a beta of 2.21, this fund is more volatile than a broad market index of fixed income securities. Taking this into account, VWESX has a positive alpha of 0.44, which measures performance on a risk-adjusted basis.


Investors should also consider a bond's rating, which is a grade ( 'AAA' to 'D' ) given to a bond that indicates its credit quality. With this letter scale in mind, VWESX has 42.08% in high quality bonds rated at least 'AA' or higher, while 56.35% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of A, and focuses on high quality securities.


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, VWESX is a no load fund. It has an expense ratio of 0.22% compared to the category average of 0.40%. VWESX is actually cheaper than its peers when you consider factors like cost.

This fund requires a minimum initial investment of $3,000, and each subsequent investment should be at least $1.

Bottom Line

Overall, Vanguard Long-Term Investment-Grade Income Investor ( VWESX ) has a high Zacks Mutual Fund rank, strong performance, worse downside risk, and lower fees compared to its peers.

This could just be the start of your research on VWESXin the Investment Grade Bond - Long category. Consider going to for additional information about this fund, and all the others that we rank as well for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out for more information on our screening capabilities, Rank, and all our articles as well.

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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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