Is Vanguard Tax-Managed Small Cap Investor (VTMSX) a solid mutual fund choice right now?

IIf you’re looking for mutual fund equity report funds, a place to start might be Vanguard Tax-Managed Small Cap Investor (VTMSX). VTMSX carries a Zacks mutual fund rating of 2 (buy), which is based on nine predictor factors such as size, cost and past performance.

Fund/manager history

Vanguard Group is based in Malvern, PA, and is the manager of VTMSX. Vanguard Tax-Managed Small Cap Investor debuted in April 1999, and since then VTMSX has accumulated approximately $7.64 billion in assets, according to the most recent date available. The current fund manager, William Coleman, has been in charge of the fund since April 2016.


Of course, investors are looking for strong performance in funds. This fund has a 5-year annualized total return of 9.84% and ranks in the top third of its peers in the category. Investors who prefer to analyze shorter time frames should look at its 3-year annualized total return of 13.35%, which puts it in the top third over this period.

When looking at a fund’s performance, it’s also important to note the standard deviation of returns. The lower the standard deviation, the less volatility the fund experiences. VTMSX’s standard deviation over the past three years is 23.16% compared to the category average of 19.73%. Looking at the last 5 years, the standard deviation of the fund is 21.42% compared to the category average of 17.39%. This makes the fund more volatile than its peers over the past half-decade.

Risk factors

Investors should note that the fund has a 5-year beta of 1.13, meaning it is hypothetically more volatile than the market as a whole. Since alpha represents the performance of a portfolio on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, it is also worth paying attention to this measure. Over the last 5 years, the fund has a negative alpha of -3.79. This means that the managers of this portfolio have difficulty choosing stocks that generate returns above the benchmark index.


Exploring the stock 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 whether there are any inherent biases in their approach. For this particular fund, the focus is primarily on stocks that are traded in the United States.

Currently, this mutual fund holds 87.89% equity, with an average market capitalization of $3.39 billion. The fund has the highest exposure to the following market sectors:

  1. Finance
  2. Industrial Cyclic
  3. Technology


For investors, it is essential to take a closer look at the cost parameters, as costs are increasingly important for mutual fund investments. 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, VTMSX is a no-load fund. It has an expense ratio of 0.09% compared to the category average of 1.08%. So, VTMSX is actually cheaper than its peers from a cost perspective.

Investors should also note that the minimum initial investment for the product is $10,000 and each subsequent investment must be $1.


Overall, Vanguard Tax-Managed Small Cap Investor (VTMSX) has a high Zacks Mutual Fund ranking, and in conjunction with its relatively strong performance, medium downside risk, and lower fees, this fund appears to be a good potential choice for investors right now.

This might just be the start of your search for VTMSX in the Mutual Fund Stock Report category. Consider going to for more information on this fund, and all the others we rank for more information as well. If you’re more of an equity investor, be sure to also check out our Zacks Rankings and comprehensive suite of tools we make available to both novice and professional investors.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Dolores W. Simon