Is Vanguard Windsor-II Investor (VWNFX) a Strong Mutual Fund Pick Right Now?

If investors are looking at the Large Cap Value fund category, Vanguard Windsor-II Investor (VWNFX) could be a potential option. VWNFX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

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Objective

VWNFX is classified in the Large Cap Value segment by Zacks, which is an area full of possibilities. Investors interested in a stable income stream fund these mutual funds very appealing because they have a unique investing strategy. Large Cap Value funds invest in stocks with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value. This tactic often leads to low P/E ratios and high dividend yields; however, these funds’high growth opportunity are often slowed, as large-cap securities are generally in stable industries with low to moderate growth prospects.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VWNFX. Since Vanguard Windsor-II Investor made its debut in June of 1985, VWNFX has garnered more than $14.49 billion in assets. The fund is currently managed by a team of investment professionals.

Performance

Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 15.32%, 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 17.48%, 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. Over the past three years, VWNFX’s standard deviation comes in at 20.32%, compared to the category average of 17.69%. The fund’s standard deviation over the past 5 years is 16.49% compared to the category average of 14.52%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 1.07, which means it is hypothetically more volatile than the market at large. Because alpha represents a portfolio’s performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. VWNFX has generated a negative alpha over the past five years of -2.37, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Exploring 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.

Right now, 91.65% of this mutual fund’s holdings are stocks, with an average market capitalization of $297.13 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Finance

With turnover at about 61%, this fund is making fewer trades than the average comparable fund.

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, VWNFX is a no load fund. It has an expense ratio of 0.34% compared to the category average of 1%. From a cost perspective, VWNFX is actually cheaper than its peers.

This fund requires a minimum initial investment of $3,000, and each subsequent investment should be at least $1.

Bottom Line

Overall, Vanguard Windsor-II Investor ( VWNFX ) 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.

Your research on the Large Cap Value 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. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.

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