(PUB) Investing 2015

14.3% loss for the index. This is particularly encouraging, since the one thing you worry about when pursuing a mechanical strategy like this one is whether you ever suffer tremendous losses, something to which other “per- sistence” strategies are not immune. Over 29 five-year periods, Hot Hands returned an average 16.4% per annum (compared to 10.9% for the index). And over the 24 ten-year periods, the results are just as compelling, with an average annual return of 16.8% (10.6% for the index) and a worst 10-year annualized return of 7.7% versus a 0.7% loss for the market. Say No to Being Contrary As the graph on page 15 also makes crystal clear, investors who bought into the contrarian investing theory—buy- ing the prior year’s worst performer— aren’t doing themselves any favors. While there may be a time and place for contrarian thinking, this isn’t one of them. So, how can Vanguard investors like us make use of this Hot Hands phe- nomenon? First, this isn’t meant to be an all-or-nothing strategy. Again, I don’t recommend that you put all of >

your money into one Hot Hands fund. We need to use our heads as well as our history books. But the Hot Hands strat- egy does lead us to funds that can serve as one component of a well-rounded portfolio. For 2015, I haven’t recommended a shift of any Model Portfolio assets because we already own the terrif- ic management team at PRIMECAP Management through PRIMECAP Core in our Income Model Portfolio , and Capital Opportunity in both the Growth Model Portfolio and Conservative Growth Model Portfolio . Now as there still may be a few of you who never took advantage of the PRIMECAP team’s prowess while their funds were still open, you can still get in while the getting’s good by purchasing PRIMECAP Odyssey Stock (POSKX), a near-clone of PRIMECAP Core, through Vanguard Brokerage or direct at odys- seyfunds.com, as well as PRIMECAP Odyssey Growth (POGRX), which is more like the original PRIMECAP fund. Either one will serve you well. I own both, as well as their now-closed little sibling, PRIMECAP Odyssey Aggressive Growth (POAGX). Let’s see what 2015 brings. n

The Ultimate Fund Guide

25th Anniversary Edition!

WITHOUT TURNING ON A COMPUTER, without even looking up a telephone number, you can have at your fingertips all the data on your favorite Vanguard funds—with the new FFSA 2015 Independent Guide to the Vanguard Funds . This year, the 25th Anniversy Edition, we have more data than ever, plus new Vanguard funds, updated risk analysis, top holdings, etc. Even with our huge computer files and access to fund managers, Research Director Jeff DeMaso and I still find ourselves thumbing through the annual guide to find that quick statistic, a current redemption fee number, or even a total return figure for 2005. Best of all, the 2015 Guide will be available both in print and online, with a user-friendly interface for easier reading, searching and quick-reference access to the glossary, index, and table of contents. My 2015 Guide is a great resource for me, and for you. Call Customer Service at 800/211-7641 for all the details on how to sign up for the guide pre-publication.

DAN’S DO-IT-NOW ACTION RECOMMENDATIONS 4 2015’s Hot Hands fund, PRIMECAP Core , is a long-term winner. If you don’t already invest alongside the PRIMECAP team, now is a great time to do so. (See page 1) 4 Diversification is once again under the gun, but my Model Portfolios are the proof in the pud- ding that diversification works over the long run. (See page 4) 4 Vanguard has once again filed for a municipal bond index fund. It’s due out in the second quar- ter, but why wait for this index when Long-Term Tax-Exempt has more than held its own against the benchmark? (See page 12)

Daniel P. Wiener is America’s leading expert on the Vanguard family of funds. He is founder of the Fund Family Shareholder Association and chairman and chief executive officer of Adviser Investments, LLC, a Newton, Massachusetts, investment advisory firm (800-492-6868). As

Jeffrey D. DeMaso, Editor/Director of Research, works directly with Dan Wiener researching and writing the multiple-award winning Independent Adviser for Vanguard Investors newsletter. He also leads the analyst team for Adviser Investments, LLC. Jeff gradu-

editor of The Independent Adviser for Vanguard Investors , he is a five-time recipient of the Newsletter Publishers Foundation’s Editorial Excellence Award. He also edits the annual Independent Guide to the Vanguard Funds. Mr. Wiener is often quoted in the nation’s leading financial publications.

ated magna cum laude from Tufts University with a B.A. in economics, holds the Chartered Financial Analyst designation and is a member of the CFA Institute and the Boston Security Analysts Society.

16 • Fund Family Shareholder Association

www.adviseronline.com