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Vanguard Target Retirement 2035 Fund

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Look up the mutual fund at the Morningstar Star Rating site at http://www.morningstar.com/allAnalyses/fundStarRatingList.html.

Find its Morningstar Rating, Sharpe Ratio, and Standard Deviation (under Ratings and Risk). Explain what would happen to the Sharpe Ratio if the portfolio standard deviation is larger. Review the fund's Portfolio information (e.g. Asset Allocation, Style Details, Sector Weights and etc,). Discuss how the fund may perform in the next 6 to 12 months in the current macroeconomic condition.

The fund currently interested in is the Vanguard Target Retirement 2035 Fund (VTTHX).

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Solution Summary

This solution discusses Vanguard's target retirement fund in 2035, finding its Morningstar Rating, Sharpe Ratio and Standard Deviation.

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Vanguard Target Retirement 2035 Fund (VTTHX):

Morningstar (2011) provide Vanguard Target Retirement 2035 Fund (VTTHX) a 5 star rating which indicates that the mutual fund has high risk adjusted return.

Sharpe ratio and standard deviation:

The fund has a Sharpe ratio of 0.20 and standard deviation of 20.69.
If the standard deviation is larger is would result in decreased Sharpe ratio. Quantifying Investment Risk (2011) provides the formula to calculate Sharpe ratio as;
Sharpe ratio = (investment's return % - risk free return %) / investment's standard deviation
This formula indicates that increase in the denominator (standard deviation) would result in decrease in the ratio.

Investment portfolio:

Vanguard Target Retirement 2035 Fund (VTTHX) asset allocation consists of 0.78% cash, 61.44% United States stock, 26.44% non U.S stock, 10.41% bond, and 0.93% ...

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