There are plenty of choices in the Index category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard Total Stock Market Index Investor (VTSMX). VTSMX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.
Vanguard Group is based in Malvern, PA, and is the manager of VTSMX. Vanguard Total Stock Market Index Investor made its debut in April of 1992, and since then, VTSMX has accumulated about $23.35 billion in assets, per the most up-to-date date available. A team of investment professionals is the fund’s current manager.
Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 14.99%, and is 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 16.26%, 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. Over the past three years, VTSMX’s standard deviation comes in at 15.55%, compared to the category average of 14.41%. Looking at the past 5 years, the fund’s standard deviation is 16.59% compared to the category average of 13.95%. This makes the fund more volatile than its peers over the past half-decade.
The fund has a 5-year beta of 1.02, so investors should note that it is hypothetically as volatile as 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. VTSMX’s 5-year performance has produced a negative alpha of -0.96, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
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, VTSMX is a no load fund. It has an expense ratio of 0.14% compared to the category average of 0.90%. So, VTSMX is actually cheaper than its peers from a cost perspective.