Is Vanguard Mid-Cap Growth Fund (VMGRX) a Strong Mutual Fund Pick Right Now?

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If you have been looking for Mid Cap Growth funds, a place to start could be Vanguard Mid-Cap Growth Fund (VMGRX Free Report) . VMGRX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We note that VMGRX is a Mid Cap Growth fund, and this area is also loaded with many different options. Companies are usually considered growth stocks when they consistently report notable sales and/or earnings growth. Thus, Mid Cap Growth funds pick stocks–usually companies with a market cap between $2 billion and $10 billion–that demonstrate extensive growth opportunities for investors compared to their peers.

History of Fund/Manager

Vanguard Group is responsible for VMGRX, and the company is based out of Malvern, PA. Vanguard Mid-Cap Growth Fund made its debut in December of 1997, and since then, VMGRX has accumulated about $4.59 billion in assets, per the most up-to-date date available. The fund is currently managed by a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. VMGRX has a 5-year annualized total return of 10.87% and it sits in the bottom 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 9.55%, which places it in the bottom 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. VMGRX’s standard deviation over the past three years is 12.24% compared to the category average of 11.55%. Looking at the past 5 years, the fund’s standard deviation is 11.93% compared to the category average of 11.41%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. In the most recent bear market, VMGRX lost 49.61% and underperformed comparable funds by 1.51%. This could mean that the fund is a worse choice than comparable funds during a bear market.

Nevertheless, investors should also note that the fund has a 5-year beta of 1.05, 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. VMGRX’s 5-year performance has produced a negative alpha of -3.62, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Examining 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 primarily on equities that are traded in the United States.

The mutual fund currently has 93.42% of its holdings in stocks, with an average market capitalization of $14.80 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Retail Trade
  3. Industrial Cyclical
  4. Other
  5. Finance

Turnover is 140%, which means this fund makes more trades in a given year than the category average.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, VMGRX is a no load fund. It has an expense ratio of 0.36% compared to the category average of 1.20%. VMGRX is actually cheaper than its peers when you consider factors like cost.

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

Bottom Line

Overall, Vanguard Mid-Cap Growth Fund ( VMGRX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and lower fees, this fund looks like a great potential choice for investors right now.

Don’t stop here for your research on Mid Cap Growth funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare VMGRX to its peers as well for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.