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Is Vanguard PRIMECAP Fund Investor (VPMCX) a Strong Mutual Fund Pick Right Now?

If you've been stuck searching for Large Cap Growth funds, you might want to consider passing on by Vanguard PRIMECAP Fund Investor (VPMCX) as a possibility. VPMCX has a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

VPMCX 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 VPMCX. The Vanguard PRIMECAP Fund Investor made its debut in November of 1984 and VPMCX has managed to accumulate roughly $6.29 billion in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.

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Performance

Investors naturally seek funds with strong performance. VPMCX has a 5-year annualized total return of 11.63% and it sits in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 15.75%, 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 11.39%, the standard deviation of VPMCX over the past three years is 14.03%. Over the past 5 years, the standard deviation of the fund is 13.74% compared to the category average of 11.36%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. In VPMCX's case, the fund lost 44.35% in the most recent bear market and outperformed its peer group by 5%. These results could imply that the fund is a better choice than its peers during a sliding market environment.

Investors should note that the fund has a 5-year beta of 1.09, so it is likely going to be 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. The fund has produced a negative alpha over the past 5 years of -0.49, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, VPMCX is a no load fund. It has an expense ratio of 0.38% compared to the category average of 1.05%. VPMCX is actually cheaper than its peers when you consider factors like cost.

Investors should also note that the minimum initial investment for the product is $3,000 and that each subsequent investment needs to be at $1.

Bottom Line

Overall, Vanguard PRIMECAP Fund Investor ( VPMCX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, Vanguard PRIMECAP Fund Investor ( VPMCX ) looks like a somewhat weak choice for investors right now.

Want even more information about VPMCX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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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