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Is Vanguard Growth & Income Investor (VQNPX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research

Large Cap Blend fund seekers should consider taking a look at Vanguard Growth & Income Investor (VQNPX). VQNPX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We note that VQNPX is a Large Cap Blend option, an area loaded with different options. More often than not, Large Cap Blend mutual funds invest in companies with a market cap of over $10 billion. Buying stakes in bigger companies offer these funds more stability, and are well-suited for investors with a " buy and hold " mindset. Additionally, blended funds mix large, more established firms into their portfolios, giving investors exposure to value and growth opportunities.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VQNPX. Since Vanguard Growth & Income Investor made its debut in December of 1986, VQNPX has garnered more than $2.89 billion in assets. The fund's current manager is a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 10.95%, and is in the top 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 12.62%, 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 VQNPX over the past three years is 12.3% compared to the category average of 10.66%. Looking at the past 5 years, the fund's standard deviation is 11.96% compared to the category average of 10.77%. This makes the fund more 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 VQNPX's case, the fund lost 51.95% in the most recent bear market and underperformed its peer group by 3%. This might suggest that the fund is a worse choice than its peers during a bear market.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. VQNPX has a 5-year beta of 0.99, which means it is likely to be as volatile as the market average. 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. VQNPX has generated a negative alpha over the past five years of -0.28, demonstrating that managers in this portfolio find it difficult to pick 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 principally on equities that are traded in the United States.

As of the last filing date, the mutual fund has 83.57% of its assets in stocks, with an average market capitalization of $225.66 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Finance

Turnover is 146%, which means this fund makes more trades per year than the comparable average.

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, VQNPX is a no load fund. It has an expense ratio of 0.33% compared to the category average of 0.96%. From a cost perspective, VQNPX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $3,000; each subsequent investment needs to be at least $1.

Bottom Line

Overall, Vanguard Growth & Income Investor ( VQNPX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Large Cap Blend, make sure to go to www.zacks.com/funds/mutual-funds 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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