There are plenty of choices in the Sector - Energy category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard Energy Investor (VGENX). VGENX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We classify VGENX in the Sector - Energy category, an area that is rife with possible choices. Throughout the massive global energy sector, Sector - Energy mutual funds hold a wide range of quickly changing and vitally important industries. While oil and gas comprise the bulk of the exposure, carbon-based fuels will be the biggest group of assets in these funds, though clean energy is starting to pick up steam.
History of Fund/Manager
Vanguard Group is based in Malvern, PA, and is the manager of VGENX. Vanguard Energy Investor debuted in May of 1984. Since then, VGENX has accumulated assets of about $2.06 billion, according to the most recently available information. The fund's current manager is a team of investment professionals.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of -5.23%, and is in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 4.36%, 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. VGENX's standard deviation over the past three years is 17.6% compared to the category average of 14.75%. Over the past 5 years, the standard deviation of the fund is 19.04% compared to the category average of 15.02%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. VGENX lost 48.46% in the most recent bear market and outperformed its peer group by 6.86%. This might suggest that the fund is a better choice than its peers during a bear market.
Nevertheless, with a 5-year beta of 1.03, the fund is likely to be as volatile as 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. VGENX has generated a negative alpha over the past five years of -11.86, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
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, VGENX is a no load fund. It has an expense ratio of 0.39% compared to the category average of 1.49%. From a cost perspective, VGENX is actually cheaper than its peers.
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 Energy Investor ( VGENX ) has a high Zacks Mutual Fund rank, strong performance, average downside risk, and lower fees compared to its peers.
Your research on the Sector - Energy 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. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.
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