If you've been stuck searching for Allocation Balanced funds, consider Vanguard STAR Fund (VGSTX) as a possibility. VGSTX possesses a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
VGSTX is classified in the Allocation Balanced segment by Zacks, which is an area full of possibilities. Here, investors are able to get a good head start with diversified mutual funds, and play around with core holding options for a portfolio of funds. Allocation Balanced funds look to invest across a balance of asset types, like stocks, bonds, and cash, though including precious metals or commodities is not unusual; these funds are mostly categorized by their respective asset allocation.
History of Fund/Manager
Vanguard Group is based in Malvern, PA, and is the manager of VGSTX. Vanguard STAR Fund made its debut in March of 1985, and since then, VGSTX has accumulated about $23.09 billion 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. VGSTX has a 5-year annualized total return of 7.46% and is 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 4.08%, which places it in the bottom 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. Compared to the category average of 12.28%, the standard deviation of VGSTX over the past three years is 13.87%. The fund's standard deviation over the past 5 years is 14.05% compared to the category average of 12.95%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
The fund has a 5-year beta of 0.73, so investors should note that it is hypothetically 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. With a negative alpha of -3.99, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
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, VGSTX is a no load fund. It has an expense ratio of 0.30% compared to the category average of 0.80%. VGSTX is actually cheaper than its peers when you consider factors like cost.
Investors need to be aware that with this product, the minimum initial investment is $1,000; each subsequent investment needs to be at least $1.
Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.
Bottom Line
Overall, Vanguard STAR Fund ( VGSTX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, Vanguard STAR Fund ( VGSTX ) looks like a good potential choice for investors right now.
For additional information on the Allocation Balanced 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 VGSTX too for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
