(PUB) Investing 2015

Vanguard’s ETF stable, and hence gets my vote for the Growth Index Model . While a higher yield often equates to more risk in bonds, the cor- porate sector is much healthier than it was heading into the 2007–09 credit crunch. And with maturities here on the short side, we’re not exactly looking at a fund that will get crushed in a rising-rate environment. In fact, those higher yields will provide a bit more cushion when interest rates do rise. Short-Term Investment-Grade This remains my standby shock- absorber fund. Only top-tier bonds make the cut for Short-Term Investment-Grade, so cred- it quality is extremely high. And given the focus on short-maturity securities, interest-rate risk here is low. To understand this fund and how it compares to its Vanguard siblings, consider its two largest drawdowns: -2.2% in 1994 and -7.6% in 2008, both of which are relatively minor. The 1994 experience was driven by a quick rise in interest rates, and the fund held up relatively well, thanks to its yield advantage and short maturity profile. In 2008, anything that wasn’t Treasury-issued was shunned by the >

market, and this fund suffered for it, underperforming Vanguard’s gov- ernment security short-term funds. However, its resilience can be seen in its short, six-month recovery time. 2013 was another example of how a yield advantage helps with- stand rising rates. While its short- term peers struggled to generate any return at all in 2013, and Total Bond Market declined 2.3%, Short-Term Investment-Grade was able to notch a return of 1.0%—tops among all of Vanguard’s actively managed invest- ment-grade bond funds. Should rates rise in the future—and I do think the trend will be for higher rates (although I’ve been early in this warning)—this fund should continue to serve us well. Total International Stock ETF Providing broad exposure to for- eign stocks, both from developed and emerging countries, Total International Stock ETF is an index replacement for International Growth in the Growth Index Model . As I mentioned above, and have talked about several times, don’t give up on foreign stocks. Diversification works, though I prefer the use of an active man- ager for my foreign stock exposure. 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 Why have my Model Portfolios outperformed? Chalk it up to diversified portfolios centered around Vanguard’s best actively managed funds. (See page 1) 4 If you can stomach some changes in price, the new Ultra-Short-Term Bond may provide a little extra yield for near-term money that you won’t need tomorrow. (See page 4) 4 As I’ve recommended for years, don’t give up on international stocks (see page 5). Vanguard (page 3) and Charles Plowden, co-manager on Global Equity (page 4) agree.

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