Vanguard Mutual Fund Evaluation
FIN/420
1/26/2014

The Vanguard Group The Vanguard Group offers an array of mutual funds, exchange-traded funds, brokerage, and asset management. When choosing and comparing mutual funds, there are characteristics that you need to first evaluate. This paper will review five different categories of mutual funds that Vanguard Group offers its investors.
Actively Managed Common Stock Fund The Selected Value (ticker VASVX) is an actively managed common stock fund with a 4 star Morningstar rating with a minimum investment of $3,000. This fund does not have a front or rear load fee. The total annual fund operating expenses are 0.41% which means that for every $100 you invest, $.41 goes to paying the person who sold you the fund. VASVX is a mid-cap value investment with a low fee level.
The fund seeks to provide long-term capital appreciation and income. The fund invests mainly in the stock of mid-size U.S. companies, choosing stocks considered by an advisor to be undervalued. Securities include stocks, bonds, and money market instrument, totaling 132 holdings and ten industries. The five largest holdings as of September 29, 2014 are Micron Technology Inc., Hanesbrand Inc. Common Stock, Royal Caribbean Cruises Ltd. Co, Omnicare, Inc. Common Stock, and Discover Financial Services Com. The fund inception occurred on February 15, 1996 and has been managed by Barrow since 1999. The fund inception date tells us that the mutual fund has been around for 19 years and the fund manager for 16 years. This tells us that this mutual fund is more stable than others who are newer or have a less experienced fund manager. This fund has returned 6.36% over the past year, 20.30% over the past three years, and 15.96% over the past five years, and 9.26% over the past decade. These numbers prove that this is a top choice for long-term investors like myself.
Fixed Income Fund The Prime Money Market Fund (ticker VMMXX) is a money market fund with a 4 star Morningstar rating with a minimum investment of $3,000. This fund does not have a front or rear load fee. The total annual fund operating expenses are 0.14% which means that for every dollar that you invest, $.14 goes to paying the person who sold you the fund. According to “Vanguard Prime Money Market Inv” (2014) “the fund seeks to provide current income while maintaining liquidity and a stable share price of $1. The fund invests primarily in high-quality, short-term money market instruments, including certificates of deposit, banker’s acceptances, commercial paper, and other money market securities” (para. 1). The five largest holdings include US Treasury Note, Federal National Mortgage Assn., United States Treasury Bills, Federal Home Loan Bank Discount Notes, and Federal Home Loan Bank Discount Notes.
The fund inception occurred on June 4, 1975, and has been managed by David Glocke since 1997. The fund inception date tells us that the mutual fund has been around for 30 years and the fund manager for 16 years. The average annual returns as of 12/31/2014 are: the 1st year 0.01%, 5th year 0.04%, and 10th year 1.63%. Experts rank this fund as number six in the top 25 largest mutual funds. This fund is considered one of the most conservative investment options that Vanguard offers. This fund is a good option for investors looking for short-term savings plan goals, unlike myself who is looking for long-term investments.
Balanced Fund Target Retirement 2015 (ticker VTXVX) is a balanced fund with a Morningstar rating of 4 stars and a minimum investment of $1,000. This fund does not have a front or rear load fee. The total annual fund operating expenses are 0.16% which means that for every dollar that you invest, $.16 goes to paying the person who sold you the fund.
The investment seeks to provide capital appreciation and current income consistent with its current asset allocation. The fund invests in other Vanguard mutual funds according to an asset allocation strategy designed for investors planning to retire and leave the workforce in or within a few years of 2015 (the target year). The funds asset allocation will become more conservative over time, meaning that the percentage of assets allocated to stocks will decrease while the percentage of assets allocated to bonds and other fixed income investments will increase. This investment is superb for long-term investors like myself.
The fund inception occurred on October 27, 2003, and has been managed by Michael Buek since 2014. The fund inception date tells us that the mutual fund has been around for 23 years and the fund manager for one year. This fund has been up for ten years and down for one year which tells us that the new manager may have not been the correct choice.
International Fund Developed Markets Index Admiral Share (ticker VTMGX) is a Vanguard International Fund with a 3 star Morningstar rating and a $3,000 minimum balance. This fund does not have a front or rear load fee. The total annual fund operating expenses are 0.06% which means that for every dollar that you invest, $.06 goes to paying the person who sold you the fund. The expense ratio is also low at 0.09%. According to “Best Vanguard Index Funds 2014 (2009-2015), “the index fund provides investors low-cost diversified exposure to developed foreign markets. The fund invests in companies located in Europe, Asia, and Australia, which make up 75% of the non-U.S. equity market” (para. 2). There are five primary industries that this fund encompasses. The top five largest holdings include Nestle SA, Royal Dutch Shell plc, Novartis AG, Roche holding AG, and HSBC Holdings plc.
The fund inception occurred on August 17, 1999, and has been managed by F. William McNabb III since 2009. Both the fund and the manager have been stable over the past years which makes this a strong investment choice. According to “Best Vanguard Index Funds 2014 (2009-1015), “since this fund focuses on non-U.S. stocks, the fund can be more volatile than a domestic fund. In addition to the stock market risk, the fund is also subject to currency risk and may have a higher degree of country risk than other international funds” (para. 3). Long-term investors may wish to consider this fund complementary to a well-balanced domestic equity portfolio.
Fund Devoted to Retirement Investing The LifeStrategy Conservative Growth Fund (ticker VSCGX) is a Vanguard retirement with a 4 star Morningstar rating. This fund does not have a front or rear load fee. The total annual fund operating expenses are 0.14% which means that for every dollar that you invest, $.14 goes to paying the person who sold you the fund. The expense ratio is low at 0.17%.
The fund’s objective is to provide current income and low to moderate growth. There are five different securities that this fund invests in including cash, US stocks, non-US stocks, bonds, and other. This fund is invested in different Vanguard indexes of stocks and bonds.
The fund inception date was 09/30/1994 and is managed by Vanguard Group, Inc. According to Vanguard Marketing Corporation (2014) “the fund is subject to the risks associated with the stock and bond markets. Since bonds usually are less volatile than stocks, and because the fund invests most of its assets in fixed income securities, the fund’s overall level of risk should be relatively low” (p. 24). VSCGX would be suitable for any low-risk investor, including myself.
Conclusion
Mutual funds are a great addition to anyone’s portfolio. There are different classifications depending upon what the investor is looking for. Some different considerations include the load fees, operating expenses, and the Morningstar rating system. All of these will help you to decide which investment is suitable for you.

References
Best Vanguard Index Funds 2014. (2009-2015). Retrieved from http://www.brokerage-review.com
Vanguard Marketing Corporation. (2014, October). Vanguard Life Strategy Funds Prospectus, Volume1.
Vanguard Prime Money Market Inv. (2014). Retrieved from http://www.slavic.net