(PUB) Investing 2015

S P E C I A L E X P A N D E D 1 6 - P A G E I S S U E

Model Portfolios................................................................ 2 Don’t Fear a Top................................................................ 7 Performance Review.................................................... 8-11 Marketing Coup for Vanguard, Meh for Investors........... 12 Targeting Cheaper Shares............................................... 14 Older and Messier.......................................................... 14 June Special Distributions. ............................................. 16 Dan’s Do-It-Now Action Recommendations.................... 16 JULY 2015

Kick Can, Stub Toe, Default TRY AS THEY MIGHT, the Greek government couldn’t kick the debt can any further down the road as June closed, sparking volatility across the globe. Not that the Greeks were alone. China’s stock bubble and Puerto Rico’s pending default also played into big market moves. Meanwhile, here at home, the economy continues to show signs of expansion. Having tried to bundle payments, defer payments, and finally call a vote on payments (and whether to proceed down the path of austerity or not), Greece blinked before the eurozone’s leaders and was forced to stop a euro drain by closing the banks and stock market to keep whatever money was still in the system from disappearing. Greeks had been yanking hundreds of millions of euros from the banking system on a daily basis. For all the turmoil, Total International Stock dropped just 2.7% in June and is up 5.4% for the year. Total Stock Market was off 1.7% for the month but up 1.8% in the first half. A flight to the safety of Treasurys couldn’t make up for all of the bond mar- ket’s declines due to rising interest rates (the 10-year Treasury’s yield rose from 2.10% to 2.34% and its price fell 1.9% during the month), and Total Bond Market , off 1.0% this past month, is also off a fractional 0.2% for the year. Our portfolios have held up quite well, with year-to-date gains ranging from 1.5% for the Income Model Portfolio to 3.9% for the Growth Model Portfolio . Health Care ’s 13.8% gain has helped as has the 6.7% return from International Growth . Why the relatively minor market response given all the media’s attention? Greece sim- ply doesn’t pose the same systemic risk it did when its debt drama debuted four years

AVERAGEVANGUARD INVESTOR* June: -1.6% YTD: 1.6%

-3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0%

JMAMF JDNOSAJ

*See the footnotes on page 2.

DOW JONES INDUSTRIALS June Close: 17619.51

16000 16600 17200 17800 18400

JMAM F JD NOS AJ

STANDARD & POOR’S 500 June Close: 2063.11

1800 1900 2000 2100 2200

JMAM F JD NOS AJ

NASDAQ COMPOSITE June Close: 4986.87

SEE DEFAULT PAGE 3 >

4000 4300 4600 4900 5200

BONDS 101 Bond ABCs

JMAM F JD NOS AJ

3-MO.TREASURY BILLYIELD June Close: 0.01%

ONE CARDINAL RULE OF INVESTING is never to invest in something you don’t under- stand. Yet all most investors I talk to seem to be able to say about bonds with any con- fidence is that they are safe. Millions of investors regularly buy bonds and bond funds with very little knowledge of just how bonds (and the bond market) work. Stocks are a little easier—most people “get” stocks. When you buy a stock, you own a piece of a company, and as that stock’s price goes up and down, you make or lose money. But bonds seem to leave people at a loss for words, and, on top of that, today many inves- tors are questioning the one thing they thought they knew about bonds—that they’re safe. I can’t say I blame bond investors for their confusion and unsettled feelings. The media has been painting a picture of a bond market turned upside down. For years inves- tors have been warned of the imminent death of the bond bull market. And the end of

0.00% 0.01% 0.02% 0.03% 0.04%

JMAM F JD NOS AJ

10-YR.TREASURY NOTE YIELD June Close: 2.34%

1.6% 2.0% 2.4% 2.8% 3.2%

JMAM F JD NOS AJ

SEE BONDS PAGE 4

>

A PUBLICATION OF FUND FAMILY SHAREHOLDER ASSOCIATION • VOL. 25, NO. 7 The Independent Adviser for Vanguard Investors and FFSA are completely independent of The Vanguard Group, Inc.