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VFIIX - Vanguard GNMA Fund
| VFIIX Invests In: U.S. government-backed mortgages. Key Statistic: Low standard deviation. |
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After the bond market collapse in 2008, many bond investors are now looking for funds that offer comfort, value, and reliability.
Vanguard's GNMA fund excels in all of those categories.
VFIIX invests in government-backed mortgage securities, which are very high-quality bonds. Many government bond funds can boast great returns, but few have delivered great returns while keeping risks and expenses low.
Fund manager Thomas Pappas takes a very conservative approach to investing. Let's evaluate some of the fund's characterictics:
- All of the bonds in the portfolio have a pristine AAA bond credit rating.
- Based to the low duration, interest rates don't drastically affect this fund. This is a huge plus for investors who want to hold this fund for a long period of time.
- The fund's low beta means investors took on less risk than the bond market index. The low beta is a good measure of a fund's risk, and this fund is lower than average.
- Over the long term, the fund's earnings have been slow and steady. The fund's 3.191 standard deviation indicates that the returns are very consistent. More consistent returns equals lower risk for investors.
- Most importantly, the bonds in this portfolio are guaranteed by the full faith and credit of the US Government.
Investors in Vanguard GNMA shouldn't worry about losing their investment. Ginnie Mae bonds are the most secure type of mortgage-backed security.
Vanguard is known for their no-load funds and low expense ratios, and this fund is no different. The mind-blowing .22% expense ratio is the lowest in the industry for government mortgage funds.
Conservative investors will also appreciate the zero up front sales charge.
VFIIX aims to deliver great returns by keeping investment costs very low, and it absolutely succeeds. This fund has posted positive total returns for the past seven calendar years and solidly outperformed other funds in the category.
The fund has also earned positive returns every year since 1994.
Thomas Pappas' strategy for the past 15 years speaks for itself. He has acheived both low volatility and great long-term returns. Pappas has also managed to work with the Vanguard philosophy of keeping costs low.
All of these critical elements work together to make Vanguard's GNMA fund a best bond funds pick.
1. (3 year standard deviation as of 10/31/09)
Fund information is provided by Morningstar.
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