Having trouble finding a Muni – Bonds fund? Vanguard NY Long-Term Tax-Exempt Investor (VNYTX) is a potential starting point. VNYTX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.
VNYTX is one of many Muni – Bonds funds to choose from. Muni – Bonds funds invest in debt securities issued by states and local municipalities, which are typically used to pay for infrastructure construction, schools, and other government functions. These securities can be backed by taxes (revenue bonds), but others are known as ” general obligation ” and are not necessarily backed by a defined source. These bonds are especially attractive because of their inherent tax benefits.
Vanguard Group is responsible for VNYTX, and the company is based out of Malvern, PA. The Vanguard NY Long-Term Tax-Exempt Investor made its debut in April of 1986 and VNYTX has managed to accumulate roughly $488.43 million in assets, as of the most recently available information. Adam Ferguson is the fund’s current manager and has held that role since June of 2013.
Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 0.66%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 1.7%, which places it in the top third during this time-frame.
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It is important to note that the product’s returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund’s [%] sale charge. If sales charges were included, total returns would have been lower.
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, VNYTX’s standard deviation comes in at 8.58%, compared to the category average of 11.25%. Over the past 5 years, the standard deviation of the fund is 7.46% compared to the category average of 10.57%. This makes the fund less volatile than its peers over the past half-decade.
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 investors who think interest rates will rise, this is an important factor to consider. VNYTX has a modified duration of 8.3, which suggests that the fund will decline 8.3% for every hundred-basis-point increase in interest rates.
Since income is, of course, a big reason for purchasing a fixed income security, it is always important to consider the fund’s average coupon. This metric calculates the fund’s average payout in a given year. For example, this fund’s average coupon of 4.2% means that a $10,000 investment should result in a yearly payout of $420.
While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.
Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks. VNYTX carries a beta of 0.85, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 0.63, which measures performance on a risk-adjusted basis.
Investors should also consider a bond’s rating, which is a grade ( ‘AAA’ to ‘D’ ) given to a bond that indicates its credit quality. With this letter scale in mind, VNYTX has 71.9% in high quality bonds rated at least ‘AA’ or higher, while 24.5% are of medium quality, with ratings of ‘A’ to ‘BBB’. The fund has an average quality of AA, and focuses on high quality securities.
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, VNYTX is a no load fund. It has an expense ratio of 0.17% compared to the category average of 0.83%. So, VNYTX is actually cheaper than its peers from a cost perspective.
This fund requires a minimum initial investment of $3,000, and each subsequent investment should be at least $1.
Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.
Overall, Vanguard NY Long-Term Tax-Exempt Investor ( VNYTX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard NY Long-Term Tax-Exempt Investor ( VNYTX ) 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 Muni – Bonds, make sure to go to www.zacks.com/funds/mutual-funds 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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This article originally published on Zacks Investment Research (zacks.com).
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