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Is Vanguard Information Technology Index Admiral (VITAX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research

If you're looking for a Sector - Tech fund category, then a possible option is Vanguard Information Technology Index Admiral (VITAX). 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

The world of Sector - Tech funds is an area filled with options, and VITAX is one of them. Sector - Tech mutual funds allow investors to own a stake in a notoriously volatile sector with a much more diversified approach. Tech companies can be in any number of industries such as semiconductors, software, internet, networking just to name a few.

History of Fund/Manager

VITAX is a part of the Vanguard Group family of funds, a company based out of Malvern, PA. Since Vanguard Information Technology Index Admiral made its debut in January of 2004, VITAX has garnered more than $3.03 billion in assets. The fund is currently managed by Walter Nejman who has been in charge of the fund since December of 2015.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 20.07%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 27.84%, 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. The standard deviation of VITAX over the past three years is 16.09% compared to the category average of 17.16%. Looking at the past 5 years, the fund's standard deviation is 16.05% compared to the category average of 17.08%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

It's always important to be aware of the downsides to any future investment, so one should not discount the risks that come with this segment. In the most recent bear market, VITAX lost 50.65% and outperformed its peer group by 3%. This means that the fund could possibly be a better choice than its peers during a down market environment.

Nevertheless, with a 5-year beta of 1.19, the fund is likely to be more volatile than the market average. 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 positive alpha of 6.04, 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 mostly on equities that are traded in the United States.

This fund is currently holding about 94.36% stock in stocks, which have an average market capitalization of $394.39 billion. With turnover at about 5%, this fund is making fewer trades than its comparable peers.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, VITAX is a no load fund. It has an expense ratio of 0.10% compared to the category average of 1.39%. VITAX is actually cheaper than its peers when you consider factors like cost.

While the minimum initial investment for the product is $100,000, investors should also note that each subsequent investment needs to be at least $1.

Bottom Line

Your research on the Sector - Tech segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well 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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