Is Vanguard Growth Index Investor (VIGRX) a Strong Mutual Fund Pick Right Now?

There are plenty of choices in the Large Cap Growth category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard Growth Index Investor (VIGRX). While this fund is not tracked by the Zacks Mutual Fund Rank, we were able to examine other factors like performance, volatility, and cost.

Objective

VIGRX is part of the Large Cap Growth section, and this segment boasts an array of other possible options. Large Cap Growth mutual funds purchase stakes in numerous large U.S. companies that are expected to develop and grow at a faster rate than other large-cap stocks. Companies are usually considered to be large-cap if their market capitalization is over $10 billion.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VIGRX. Vanguard Growth Index Investor debuted in November of 1992. Since then, VIGRX has accumulated assets of about $554.40 million, according to the most recently available information. Gerard C. O'Reilly is the fund's current manager and has held that role since December of 1994.

Performance

Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 12.71%, 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 15.47%, which places it in the middle 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. Compared to the category average of 10.67%, the standard deviation of VIGRX over the past three years is 13.27%. Over the past 5 years, the standard deviation of the fund is 13.17% compared to the category average of 10.72%. 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 the most recent bear market, VIGRX lost 47.19% and outperformed its peer group by 2%. This makes the fund a possibly better choice than its peers during a sliding market environment.

Nevertheless, with a 5-year beta of 1.07, the fund is likely to be more volatile than 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. With a positive alpha of 0.7, 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.

Right now, 82% of this mutual fund's holdings are stocks, with an average market capitalization of $267.20 billion. The fund has the heaviest exposure to the following market sectors:

1. Technology

2. Retail Trade

With turnover at about 11%, this fund is making fewer trades than comparable funds.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, VIGRX is a no load fund. It has an expense ratio of 0.17% compared to the category average of 1.05%. Looking at the fund from a cost perspective, VIGRX 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

Don't stop here for your research on Large Cap Growth funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare VIGRX to its peers as well for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.

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