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The Vanguard Limited Term Tax Exempt Bond Fund VMLUX LB Rating Report

Symbol: VMLUX
Category: Municipal Bond Fund/Short Duration Bond Fund
Style: Active
LB Rating: ***** 5 Stars
Last Updated: 12/18/12

Useful Links

Using LB Ratings to choose a municipal bond fund
Municipal bond funds – Are they right for you?
Active vs. Passive bond funds
Bond Mutual Fund Fees

 

 

The Vanguard Limited Term Tax Exempt Fund VMLUX

Summary: In an environment where yields on short term municipal bond funds are miniscule, Vanguard’s focus on super low fees make the Vanguard Limited Term Tax Exempt Fund VMLUX standout.

Commentary: Most investment grade short term municipal bond funds currently yield less than 1%.  In a category where average fees can be above .5%, this does not leave much room before you actually earn a negative yield on the fund after expenses.  This is why Vanguard’s reputation for low fees is extra important for short term municipal bond funds.  For those investors with $50,000 or more to invest, the Vanguard Limited Term Tax Exempt Fund has a tiny expense ratio of .12% (.2% for those with less than $50K).  Like all Vanguard funds there is no load on this fund.

With a duration of 2.3 the Vanguard Limited Term Tax Exempt fund has a slightly longer duration than the category average.  However, it also takes less credit risk, which we feel is a nice balance in a short term municipal bond fund.

 

Vanguard Limited Term Tax Exempt Fund VMLUX Rating Criteria

Short-Term Performance: Good.  The fund has slightly underperformed the average short term municipal bond fund over the last 12 months by -.05%.  However, it has outperformed the average fund by .31% per year on average over the last 3 years.

Long-Term Performance: Excellent.  The Vanguard Limited Term Tax Exempt Fund VMLUX has outperformed the average short term municipal bond fund over the last 5 and 10 year time frames. The fund has outperformed the average short term municipal bond fund by .65% per year on average over the last 5 years, and by .51% per year on average over the last 10 years.

Risk Level Relative To Returns: Good.  The firm takes a bit more interest rate risk than other short term municipal bond funds and a bit less credit risk a strategy which has contributed to its long term outperformance.

Fees: Excellent. No sales load and 0.12% expense ratio.  You can learn more about bond mutual fund fees here.

Manager Tenure: Good.  The Vanguard Limited Term Tax Exempt Fund VMLUX’s portfolio manager Marlin G. Brown has managed the fund since 2008.  With other fund family’s we would say that this was just ok, however Vanguard is different.  They have very tight internal controls on how far their managers can stray from their benchmarks, so the fund company itself has a lot of say over each of the individual managers.  

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Users should remember that all trading carries risks and users should only invest in regulated firms. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
David Waring

David Waring was the founder of LearnBonds.com and has been a major contributor to the extensive library of investing news and information available on the site. Until the launch of Learnbonds.com in late 2011 there was no single site on the internet catering exclusively to the individual bond investor. This was true even though more individuals own stocks than bonds. Learn Bonds was launched to fill that gap.