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There are plenty of choices in the Government Mortgage - Intermediate category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard GNMA Investor (VFIIX). VFIIX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
VFIIX is one of many Government Mortgage - Intermediate funds to choose from. Government Mortgage - Intermediate funds focus on the mortgage-backed securities (MBS) market. This market takes mortgages, packages them together, and sells off the pooled securities to investors. This particular category focuses on MBS that usually have at least three years to maturity, but less than 10, giving a medium risk and yield profile to funds here.
History of Fund/Manager
Vanguard Group is based in Malvern, PA, and is the manager of VFIIX. Since Vanguard GNMA Investor made its debut in June of 1980, VFIIX has garnered more than $7.05 billion in assets. The fund's current manager, Michael Garrett, has been in charge of the fund since June of 2010.
Performance
Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 2.32%, and it sits 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 1.07%, 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 VFIIX over the past three years is 1.94% compared to the category average of 5.51%. Over the past 5 years, the standard deviation of the fund is 2.26% compared to the category average of 5.47%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a specific bond's interest rate sensitivity, and is an excellent way to judge how fixed income securities will respond to a shifting rate environment.
For those that believe interest rates will rise, this is an important factor to consider. VFIIX has a modified duration of 4.4, which suggests that the fund will decline 4.4% for every hundred-basis-point increase in interest rates.
Income
It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 3.6% means that a $10,000 investment should result in a yearly payout of $360.