Is Vanguard Real Estate Index Investor (VGSIX) a Strong Mutual Fund Pick Right Now?
Have you been searching for a Sector – Real Estate fund? You might want to begin with Vanguard Real Estate Index Investor (VGSIX). VGSIX has no Zacks Mutual Fund Rank, but we have been able to look into other metrics like performance, volatility, and cost.
Objective
Zacks categorizes VGSIX in Sector – Real Estate, which is a segment packed with options. Real estate investment trusts (REITs) are a popular income vehicle thanks to their taxation rules, and Sector – Real Estate mutual funds typically invest in them. A REIT is required to pay out at least 90% of its income annually to avoid double taxation, and this technique makes securities in these funds high dividend players-almost bond-like in some cases-though their risk is similar to equities.
History of Fund/Manager
Vanguard Group is responsible for VGSIX, and the company is based out of Malvern, PA. Vanguard Real Estate Index Investor made its debut in May of 1996, and since then, VGSIX has accumulated about $59.64 million in assets, per the most up-to-date date available. A team of investment professionals is the fund’s current manager.
Performance
Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 3.03%, and it sits 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 6.26%, which places it in the middle 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. The standard deviation of VGSIX over the past three years is 16.52% compared to the category average of 12.15%. Over the past 5 years, the standard deviation of the fund is 19.1% compared to the category average of 14.51%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
Investors should note that the fund has a 5-year beta of 1.03, which means it is hypothetically as volatile as 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. With a negative alpha of -7.81, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
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, VGSIX is a no load fund. It has an expense ratio of 0.26% compared to the category average of 0.96%. From a cost perspective, VGSIX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $0 and that each subsequent investment has no minimum amount.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
For additional information on this product, or to compare it to other mutual funds in the Sector – Real Estate, make sure to go to www.zacks.com/funds/mutual-funds 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.
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This article originally published on Zacks Investment Research (zacks.com).