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Is Vanguard Developed Markets Index Admiral (VTMGX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research

If you're looking for a Non US - Equity fund category, then a possible option is Vanguard Developed Markets Index Admiral (VTMGX). The fund does not have a Zacks Mutual Fund Rank, though we have been able to explore other metrics like performance, volatility, and cost.

Objective

VTMGX is classified in the Non US - Equity area by Zacks, and this segment is full of potential. Non US - Equity funds focus their investments on companies outside of the United States, which is an important distinction since global mutual funds tend to keep a sizable portion of their portfolio based in the United States. Most of these funds will allocate across emerging and developed markets, and can often extend across cap levels too.

History of Fund/Manager

Vanguard Group is responsible for VTMGX, and the company is based out of Malvern, PA. Since Vanguard Developed Markets Index Admiral made its debut in August of 1999, VTMGX has garnered more than $19.42 billion in assets. The fund's current manager, Christine D. Franquin, has been in charge of the fund since February of 2013.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 4.63%, and it sits in the middle third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 9.32%, 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. Compared to the category average of 10.46%, the standard deviation of VTMGX over the past three years is 11.39%. The fund's standard deviation over the past 5 years is 12.09% compared to the category average of 10.61%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. VTMGX lost 57.05% in the most recent bear market and outperformed its peer group by 2%. This means that the fund could possibly be a better choice than its peers during a down market environment.

Investors should note that the fund has a 5-year beta of 0.85, so it is likely going to be less volatile than the market at large. 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. The fund has produced a negative alpha over the past 5 years of -4.3, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

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, VTMGX is a no load fund. It has an expense ratio of 0.07% compared to the category average of 1.25%. So, VTMGX is actually cheaper than its peers from a cost perspective.

Investors need to be aware that with this product, the minimum initial investment is $3,000; each subsequent investment needs to be at least $1.

Bottom Line

For additional information on this product, or to compare it to other mutual funds in the Non US - Equity, make sure to go to www.zacks.com/funds/mutual-funds for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.


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