(PUB) Investing 2015

popping and leaving the index way behind in the performance race.) Not a single Vanguard board mem- ber owns shares in Balanced Index, but several do own stakes in Wellesley Income and Wellington. Wellington and Wellesley Income’s managers own lots of shares in their respective funds—Wellington’s managers both held stakes totaling more than $1 mil- lion each at last report. None of the three managers on Balanced Index own a share of that fund. “Select” Fixed Income Funds When it comes to bond and money market funds, Vanguard’s Select Funds , not surprisingly, include Total Bond Market and Total International Bond , as well as a smattering of short-term and intermediate-term options includ- ing Short-Term Tax-Exempt , Short- Term Inflation-Protected Securities Index , Short-Term Investment-Grade and Intermediate-Term Investment- Grade . The money market options, Prime Money Market and Tax- Exempt Money Market , are obvious, and unless you’re a resident of a state for which Vanguard offers a state-spe- cific money fund, these are fine. Among the recommended bond funds, note that there are no long-matu- >

rity funds that earn the Select Fund distinction. I wouldn’t recommend long bonds, either, given the historically low interest-rate environment we’re in and the potential for short-term losses if and when interest rates begin rising. I’d say Vanguard’s Select Fund bond recommendations are acceptable. I pre- fer the investment-grade funds to Total Bond Market, which is weighted heavi- ly with very interest-sensitive Treasurys. What’s strange is that you kind of get a smattering of maturities and durations in these bond fund choices, with Short- Term Tax-Exempt the shortest (where’s Ultra-Short-Term Bond as the taxable equivalent?) and Intermediate-Term Investment-Grade at the long end of the recommended spectrum. Do Vanguard’s directors own these funds? A few of them do, here and there, as do some of the funds’ portfolio managers. But tax-exempt bond funds are more to their liking. Vanguard vet- eran Pam Tynan keeps over $1 million in her Short-Term Tax-Exempt charge. So, that’s the story on Vanguard’s Select Fund choices. Would I buy any of them? Yes, one or two, as I’ve noted. But, for the most part, Vanguard has chosen a pretty pedestrian group of funds for its “recommended list.” Consider me unimpressed. n

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Many of you regularly access our website and its members-only features. For those who haven’t logged in lately, here’s a brief reminder of what you can do online at www. AdviserOnline.com. n STAY ON TOP OF RECENT EVENTS with news articles. n SEARCH THE WEBSITE to find archived articles and answers to your questions. n GET THE LATEST ISSUE the minute it is published online in both HTML and PDF format. n ACCESS YEARS’ WORTH OF ARCHIVES f or issues, Hotlines and news articles. n USE THE ADVISERONLINE FORUM to share and discuss investment ideas with other members of the FFSA community. n CHECK THE CUSTOMER SERVICE PAGE for help with your subscriber account. And that’s just the beginning. These features will make it easier and more enjoyable for you to get all of the advice and information you are looking for. Visit www.AdviserOnline.com now to get the most from your subscription.

DAN’S DO-IT-NOW ACTION RECOMMENDATIONS 4 Vanguard calls their top picks Select Funds , but are they really the best selections for your money? (See page 1) 4 “Sell in May and stay away” has a nice ring, but investing is rarely so simple, and good luck implementing the strategy in the real world. (See page 5) 4 ETF proponents claim the tax-efficiency crown, but the numbers tell a different tale. If you’re going passive, don’t count good old-fashion index funds out. (See page 6)

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 editor of The Independent Adviser for Vanguard

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- ated magna cum laude from Tufts University

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.

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

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