Is Vanguard Explorer Fund Admiral (VEXRX) a Strong Mutual Fund Pick Right Now?
Small Cap Growth fund seekers should consider taking a look at Vanguard Explorer Fund Admiral (VEXRX). VEXRX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
VEXRX is one of many different Small Cap Growth funds to choose from. Small Cap Growth mutual funds build portfolios around stocks with markets caps under $2 billion and large growth opportunities. Additionally, these portfolios typically highlight smaller companies in promising markets and industries.
History of Fund/Manager
Vanguard Group is based in Malvern, PA, and is the manager of VEXRX. The Vanguard Explorer Fund Admiral made its debut in November of 2001 and VEXRX has managed to accumulate roughly $18.75 billion in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.
Performance
Of course, investors look for strong performance in funds. VEXRX has a 5-year annualized total return of 20.29% and it sits in the middle third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 19.96%, 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 VEXRX over the past three years is 24.9% compared to the category average of 20.16%. Looking at the past 5 years, the fund's standard deviation is 19.89% compared to the category average of 16.6%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
The fund has a 5-year beta of 1.22, so investors should note that 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. The fund has produced a positive alpha over the past 5 years of 0.95, which shows that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.
Holdings
Investigating 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 largely on equities that are traded in the United States.
Currently, this mutual fund is holding 92.99% stock in stocks, which have an average market capitalization of $8.19 billion. The fund has the heaviest exposure to the following market sectors:
Technology
Health
Retail Trade
Industrial Cyclical
Turnover is 43%, which means, on average, the fund makes fewer trades than its comparable peers.
Expenses
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, VEXRX is a no load fund. It has an expense ratio of 0.30% compared to the category average of 1.21%. From a cost perspective, VEXRX is actually cheaper than its peers.
Investors need to be aware that with this product, the minimum initial investment is $50,000; each subsequent investment needs to be at least $1.
Bottom Line
Overall, Vanguard Explorer Fund Admiral ( VEXRX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.
For additional information on the Small Cap Growth 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 VEXRX too for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.
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