Is Vanguard Total Bond Market Index Institutional (VBTIX) a Strong Mutual Fund Pick Right Now?

Have you been searching for an Index fund? You might want to begin with Vanguard Total Bond Market Index Institutional (VBTIX). The fund does not have a Zacks Mutual Fund Rank, though we have been able to explore other metrics like performance, volatility, and cost.

History of Fund/Manager

VBTIX finds itself in the Vanguard Group family, based out of Malvern, PA. The Vanguard Total Bond Market Index Institutional made its debut in September of 1995 and VBTIX has managed to accumulate roughly $43.55 billion in assets, as of the most recently available information. The fund's current manager, Joshua Barrickman, has been in charge of the fund since February of 2013.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of -0.94%, and is in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 1.56%, which places it in the middle third during this time-frame.

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It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

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 12.43%, the standard deviation of VBTIX over the past three years is 7.19%. The standard deviation of the fund over the past 5 years is 6.26% compared to the category average of 12%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. VBTIX has a 5-year beta of 1, which means it is likely to be as volatile as the market average. 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. With a negative alpha of -0.04, 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, VBTIX is a no load fund. It has an expense ratio of 0.04% compared to the category average of 0.86%. So, VBTIX is actually cheaper than its peers from a cost perspective.

Investors should also note that the minimum initial investment for the product is $5 million and that each subsequent investment needs to be at $1

Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.

Bottom Line

This could just be the start of your research on VBTIXin the Index category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.

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This article originally published on Zacks Investment Research (zacks.com).

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