Is VTIBX a Strong Bond Fund Right Now?

Have you been searching for a International Bond - Developed fund? You might want to begin with Vanguard Total International Bond Index Investor (VTIBX). VTIBX has no Zacks Mutual Fund Rank, but we have been able to look into other metrics like performance, volatility, and cost.

Objective

Zacks categorizes VTIBX as International Bond - Developed, a segment that is packed with options. Focusing on fixed income securities outside from developed nations besides the U.S.,International Bond - Developed funds invest in assets from countries like Japan, Germany, the UK, France, and Australia. These holdings dominate the top holdings, and funds in this category offer geographic diversification; however, they can also introduce currency risk.

History of Fund/Manager

VTIBX finds itself in the Vanguard Group family, based out of Malvern, PA. The Vanguard Total International Bond Index Investor made its debut in May of 2013 and VTIBX has managed to accumulate roughly $17.80 million in assets, as of the most recently available information. The fund's current manager, Joshua Barrickman, has been in charge of the fund since May of 2013.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 0.4%, and it sits in the bottom 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 4.05%, which places it in the bottom third during this time-frame.

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. VTIBX's standard deviation over the past three years is 4.51% compared to the category average of 8.61%. Looking at the past 5 years, the fund's standard deviation is 5.38% compared to the category average of 10.15%. This makes the fund less volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a given bond's interest rate sensitivity, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.

For investors who think interest rates will rise, this is an important factor to consider. VTIBX has a modified duration of 6.77, which suggests that the fund will decline 6.77% for every hundred-basis-point increase in interest rates.

Income

It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 2.73% means that a $10,000 investment should result in a yearly payout of $273.

A higher coupon is good for those seeking a strong level of current income, but it could also pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks.

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, VTIBX is a no load fund. It has an expense ratio of 0.13% compared to the category average of 0.81%. VTIBX is actually cheaper than its peers when you consider factors like cost.

Investors need to be aware that with this product, the minimum initial investment is $0; each subsequent investment has no minimum amount.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

Want even more information about VTIBX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.

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This article originally published on Zacks Investment Research (zacks.com).

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