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Is USAA NASDAQ-100 Index Fund (USNQX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research

Any investors who are searching for Index funds should take a look at USAA NASDAQ-100 Index Fund (USNQX). The fund does not have a Zacks Mutual Fund Rank, though we have been able to explore other metrics like performance, volatility, and cost.

History of Fund/Manager

USAA Group is based in San Antonio, TX, and is the manager of USNQX. Since USAA NASDAQ-100 Index Fund made its debut in October of 2000, USNQX has garnered more than $2.34 billion in assets. Brent D. Reeder is the fund's current manager and has held that role since December of 2006.

Performance

Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 14.88%, and it sits 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 21.16%, which places it in the top third during this time-frame.

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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 7.28%, the standard deviation of USNQX over the past three years is 14.97%. The fund's standard deviation over the past 5 years is 15.15% compared to the category average of 8.24%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. In USNQX's case, the fund lost 50.21% in the most recent bear market and underperformed comparable funds by 7%. This might suggest that the fund is a worse choice than its peers during a bear market.

Even still, the fund has a 5-year beta of 1.17, so investors should note that it is hypothetically more volatile than the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. With a positive alpha of 2.25, managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Examining 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 largely on equities that are traded in the United States.

As of the last filing date, the mutual fund has 95.01% of its assets in stocks, with an average market capitalization of $385.33 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology

  2. Retail Trade

With turnover at about 2%, this fund is making fewer trades than comparable funds.

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, USNQX is a no load fund. It has an expense ratio of 0.48% compared to the category average of 0.86%. Looking at the fund from a cost perspective, USNQX is actually cheaper than its peers.

This fund requires a minimum initial investment of $3,000, and each subsequent investment should be at least $50.

Bottom Line

Your research on the Index 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. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.


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Zacks Investment Research