Is Vanguard Mid-Cap Growth Fund (VMGRX) a Strong Mutual Fund Pick Right Now?
If investors are looking at the Mid Cap Growth fund category, Vanguard Mid-Cap Growth Fund (VMGRX) could be a potential option. VMGRX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.
VMGRX is part of the Mid Cap Growth section, a segment that boasts a wide array of possible selections. While Mid Cap Growth mutual funds choose companies with a stock market valuation between $2 billion and $10 billion, stocks in these funds are also expected to show broad considerable growth opportunities for investors compared to their peers. To be considered a growth stock, companies must consistently report impressive sales and/or earnings growth.
Vanguard Group is based in Malvern, PA, and is the manager of VMGRX. Vanguard Mid-Cap Growth Fund made its debut in December of 1997, and since then, VMGRX has accumulated about $3.15 billion in assets, per the most up-to-date date available. A team of investment professionals is the fund’s current manager.
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 7.1%, 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 14.34%, which places it in the top third during this time-frame.
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. VMGRX’s standard deviation over the past three years is 20.27% compared to the category average of 21.45%. Over the past 5 years, the standard deviation of the fund is 21.03% compared to the category average of 21.14%. This makes the fund less volatile than its peers over the past half-decade.
With a 5-year beta of 1.18, the fund is likely to be more volatile than 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. VMGRX’s 5-year performance has produced a negative alpha of -7.89, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, VMGRX is a no load fund. It has an expense ratio of 0.32% compared to the category average of 1.04%. VMGRX is actually cheaper than its peers when you consider factors like cost.
While the minimum initial investment for the product is $3,000, investors should also note that each subsequent investment needs to be at least $1.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Overall, Vanguard Mid-Cap Growth Fund ( VMGRX ) 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 great potential choice for investors right now.
For additional information on the Mid 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 VMGRX too 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).