Is VSGBX a Strong Bond Fund Right Now?

Zacks Equity Research
·3-min read

There are plenty of choices in the Government Bond - Short category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard Short-Term Federal Investor (VSGBX). VSGBX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

The world of Government Bond - Short funds is an area filled with options, such as VSGBX. Government Bond - Short funds hold securities issued by the federal government of the United States of America. These are seen as extremely low risk securities from a default perspective, and are often regarded as risk-free assets. This category focuses on the short end of the curve, and that results in lower yields, but also less sensitivity to interest rate fluctuations, too.

History of Fund/Manager

Vanguard Group is responsible for VSGBX, and the company is based out of Malvern, PA. Vanguard Short-Term Federal Investor debuted in December of 1987. Since then, VSGBX has accumulated assets of about $741.10 million, according to the most recently available information. The fund's current manager, Brian Quigley, has been in charge of the fund since January of 2015.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 2.06%, and it sits in the top 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 3%, 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. Over the past three years, VSGBX's standard deviation comes in at 1.32%, compared to the category average of 7.67%. The standard deviation of the fund over the past 5 years is 1.26% compared to the category average of 6.79%. This makes the fund less volatile than its peers over the past half-decade.

This fund has a beta of 0.3, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, VSGBX has a negative alpha of -0.05, which measures performance on a risk-adjusted basis.

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, VSGBX is a no load fund. It has an expense ratio of 0.20% compared to the category average of 0.67%. So, VSGBX is actually cheaper than its peers from a cost perspective.

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

Bottom Line

Overall, Vanguard Short-Term Federal Investor ( VSGBX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on the Government Bond - Short 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 VSGBX too for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.


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