If you have been looking for Allocation Balanced funds, a place to start could be Vanguard STAR Fund (VGSTX). VGSTX possesses a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.
VGSTX is one of many Zacks' Allocation Balanced mutual funds to pick from. Allocation Balanced funds seek to invest in 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. Investors utilize Allocation Balanced funds as a way to get a good start with diversified mutual funds, as well as for core holdings in a portfolio of funds.
History of Fund/Manager
Vanguard Group is based in Malvern, PA, and is the manager of VGSTX. Since Vanguard STAR Fund made its debut in March of 1985, VGSTX has garnered more than $20.83 billion in assets. The fund's current manager, William A. Coleman, has been in charge of the fund since February of 2013.
Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 6.56%, 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 9.51%, 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 -36.4%, the standard deviation of VGSTX over the past three years is 7.67%. The fund's standard deviation over the past 5 years is 7.69% compared to the category average of 0%. This makes the fund more volatile than its peers over the past half-decade.
Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. In VGSTX's case, the fund lost 36.08% in the most recent bear market and outperformed its peer group by 45%. This could mean that the fund is a better choice than comparable funds during a bear market.
Nevertheless, investors should also note that the fund has a 5-year beta of 0.65, 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. The fund has produced a negative alpha over the past 5 years of -0.79, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
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, VGSTX is a no load fund. It has an expense ratio of 0.13% compared to the category average of -36.08%. From a cost perspective, VGSTX is actually more expensive than its peers.
This fund requires a minimum initial investment of $1,000, and each subsequent investment should be at least $1.
Overall, Vanguard STAR Fund ( VGSTX ) has a high Zacks Mutual Fund rank, strong performance, worse downside risk, and higher fees compared to its peers.
For additional information on the Allocation Balanced area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds . There, you can see more about the ranking process, and dive even deeper into VGSTX too for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.