(PUB) Investing 2015

numbing statistics that had no rele- vance to the subject at hand. It’s simply fluff and padding which is used to lull the client into believing that all is well. We fired that firm. I could go on and on, but here’s one last thought. I covered the computer industry for years during its infancy, spent time in Silicon Valley and still have plenty of friends and clients in the tech business. Since I started writ- ing to you about Vanguard in 1991 a lot has changed, but one thing that hasn’t changed is the old expression, GIGO—as in garbage-in, garbage- out. My experience with the Vanguard Portfolio Analytics Tool suggests that GIGO is still alive. If that tool is any indication of the care that goes into and the quality of the advice that comes out of a robo-adviser, whether it’s Vanguard’s or someone else’s, then another old saw comes into play: Caveat emptor . May the buyer (investor) beware. n

PDF” button on the bottom of each page, which I take to mean will make a nice-looking report out of the three data tabs I’ve just looked at. I get lots of options to put into the report, so I choose them all—why not? This is a comprehensive analytical tool, right? This should give me lots of important data with which to compare my portfo- lio to Vanguard’s. Whoa! I get a 161-page report based on Morningstar data. Incredibly, there are something like 20 pages of disclaimers and disclosures. Even my head was beginning to spin. But as I went through the report, there were literally dozens and dozens of pages of historical prices and distributions for the funds in the portfolio. Why? What’s the point? I sit on the invest- ment committee of a non-profit, and their former investment manager, a name-brand firm that coincidentally was once employed by Vanguard, used to present reports like this with brain-

get weirder. Under the “Performance & Risk” section, there’s another, dif- ferent line graph showing performance of the two portfolios. There’s just one problem: The two lines don’t start at the same time. I’m assuming this happened because Total International Stock ETF isn’t five years old. The comparison is useless. Let’s keep going. A risk/reward scatterplot for the two portfolios is produced using two different scales, so once again the comparison is tough to make. In fact, the graphs make it appear as though the Vanguard portfolio per- formed better, when in fact, it didn’t. Again, pretty useless. A more detailed portfolio “X-ray” doesn’t tell me any- thing I didn’t know and is probably way too detailed and technical for most investors anyway. Make Me a Report Now, here’s where it gets even more interesting. There’s a little “Generate HAS U.S. GROWTH been reborn, and is it worthy of investor dollars? The short answer is that it’s on the right trajectory, but its performance remains somewhat erratic. It’s been five years since Vanguard finally put shareholders out of their mis- ery and fired the incompetent managers at AllianceBernstein. Since then, with the addition of Wellington Management and Jackson Square Partners (formerly a Delaware Investments team) to the remaining duo fromWilliamBlair &Co., and the subsequent addition (through the merger in February 2014 with Growth Equity ) of teams from Baillie Gifford and Jennison Associates, performance has begun to show glimmers of hope. But I’m not ready to put my own money into U.S. Growth and wouldn’t advise you do so yet, either. For growth stocks picked by some of the finest managers on the planet, I’m still more than happy to hand my money over to

GROWTH The Five-Year Report on U.S. Growth

Better But Not Buyable

Has U.S. Growth Been Reborn?

1.17

Rising line = U.S. Growth outperforms

$3,000 $3,500 $4,000 $4,500 $5,000 $5,500 $6,000 $6,500 $7,000

1.06

1.12

U.S.Gro.vs.Growth Idx. U.S.Gro.vs.Russell1000Gro. Idx.

1.04

1.07

1.02

1.02

1.00

0.97

U.S. Gro. vs. Capital Opp. U.S. Gro. vs. Growth Index U.S. Gro. vs. Russell 1000 Gro. Idx. U.S. Gro. vs. Morgan Growth

0.98

0.92

Assets (in millions)

0.96

0.87

U.S. Gro. vs. PRIMECAP U.S. Gro. vs. Social Index

Rising line = U.S. Growth outperforms

0.94

0.82

9/10

3/11

9/11

3/12

9/12

3/13

9/13

3/14

9/14

3/15

9/15

9/10

3/11

9/11

3/12

9/12

3/13

9/13

3/14

9/14

3/15

9/15

First off, you can see in the first relative performance chart that, in its early reincarnation, U.S. Growth has had a hard time getting ahead of its bogeys. Compared to Growth Index , which tracks a CRSP index of large- cap growth stocks, and its own Russell 1000 Growth index benchmark, the fund outperformed, underper- >

the team at PRIMECAP Management, either through Vanguard’s offerings or directly into their PRIMECAP Odyssey funds. No, I’m not moving money into U.S. Growth despite it’s being named the October Hot Hands fund (see the story on page 1). But I am keeping my eye on it, and I’ve raised my rating to Hold from Sell . Here’s why:

The Independent Adviser for Vanguard Investors • December 2015 • 13

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