(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

Funds Focus: Foreign/Global............................................. 1 Model Portfolios................................................................ 2 Tech Winter : When Active Wins........................................ 4 No Inflated Returns........................................................... 6 Where’s the Diversification?............................................. 7 Performance Review.................................................... 8-11 Asset Allocation and Questionnaires.............................. 15 Dan’s Do-It-Now Action Recommendations.................... 16 NOVEMBER 2015

Many Tricks, but More Treats AS BAD AS AUGUST AND SEPTEMBER WERE for stocks, October was a treat, with the S&P 500 index gaining 8.3% and the Dow up 8.5%. Total Stock Market Index gained 7.8%, its best monthly gain since October 2011’s 11.5% rise. For all the ups and downs, Total Stock Market has only ground out a 1.8% gain for the year to date. Total International Stock Index is off 1.0%, and Total Bond Market Index is up 1.0%. 2015 could end up much like 2011, with little to show for all the day- to-day action, unlike the prior three years, as the table on page 3 clearly illustrates. Rate cuts were in the news abroad and those cuts, or the promise of them, drove mar- kets sharply higher. First it was the head of the European Central Bank, Mario Draghi, who suggested that further stimulus might be on tap as early as December. Then China tacitly acknowledged that its economy needs more stimulus, and cut both lending rates and bank reserve requirements in an effort to get more money into the hands of busi- nesses and people, where it might spur some spending. China also abandoned its “one- child” policy at month’s end in a bow to the reality that demographics are working against its interests. Here at home, the focus was on rate hikes. The Fed’s latest statement seemed clearer on the potential for a December move, and traders are giving it 50-50 odds. As I’ve said many times, whether the first hike comes in December or not, and whether it’s followed by one or several additional increases, monetary policy remains extremely accommodative. Businesses will have no trouble borrowing for expansion, and

AVERAGEVANGUARD INVESTOR* October: 4.9% YTD: 0.9%

-5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

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*See the footnotes on page 2.

DOW JONES INDUSTRIALS October Close: 17663.54

16000 16600 17200 17800 18400

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STANDARD & POOR’S 500 October Close: 2079.36

1900 1950 2000 2050 2100 2150 2200

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NASDAQ COMPOSITE October Close: 5053.75

SEE TREATS PAGE 3 >

4400 4650 4900 5150 5400

FUNDS FOCUS > FOREIGN/GLOBAL Casting a Wary Eye Overseas

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SINCEYOU AND I last took an all-encompassing look at Vanguard’s menu of foreign funds, Tax-Managed International has been retired and Global Minimum Volatility has been brought into the mix, which kind of makes sense. Vanguard already had too many broad international index funds, so dropping the Tax-Managed fund was a no-brainer. And Global Minimum Volatility adds a new low-cost, lower-risk wrinkle to what has long been a rather staid line-up. Still, as a group, Vanguard’s foreign fund offerings are rather basic, with a slew of index funds and a handful of active funds offering access to developed and emerging markets around the globe. Frontier markets haven’t made it onto Vanguard’s list, yet. Normally I’d assume something’s in the works, but given how little money is invested in frontier market funds and ETFs overall (on the order of a few billion dollars, and

3-MO.TREASURY BILLYIELD October Close: 0.07%

0.00% 0.02% 0.04% 0.06% 0.08%

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10-YR.TREASURY NOTE YIELD October Close: 2.15%

1.6% 1.9% 2.2% 2.5% 2.8%

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SEE FOCUS PAGE 12

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A PUBLICATION OF FUND FAMILY SHAREHOLDER ASSOCIATION • VOL. 25, NO. 11 The Independent Adviser for Vanguard Investors and FFSA are completely independent of The Vanguard Group, Inc.