(PUB) Investing 2015

gap. (A small note on this figure: That 21.0% gap assumes that MidCap Growth was the October Hot Hands fund in the period from October 2000 through October 2001, though MidCap Growth wasn’t “adopted” by Vanguard until mid-2002. Had the strategy been followed using Vanguard funds in exis- tence at the time, the loss would have been minimal, and the October strat- egy’s worst gap with 500 Index would be just 13.9%, making it fourth-best among the 12 monthly strategies. I just don’t want to mislead anyone by ignoring a fund that is now part of the Vanguard fold.) A Hot Hands strategy using the non-sector fund with the best one-year return at the end of November would show a failure rate almost as low as the October Hot Hands strategy. But on average, the returns using a November strategy are a bit lower versus the mar- ket compared to those from an October strategy. The tradeoff, though, is that the worst gap with the market in the November-to-November time period is actually better than in the October one. Yes, the October Hot Hands strategy remains a good one, with the best suc- cess rate of any month. Still, I prefer the December (calendar year) strategy >

since it triggers a purchase after the year-end distribution season, an impor- tant factor for those following Hot Hands in a taxable account. Please remember that a fund that qualifies for either the October Hot Hands strategy or the calendar-year Hot Hands strategy may not be rated a Buy in the Performance Review if I

Online Resources

U.S. Growth is the official October Hot Hands fund, but I’m sticking with my PRIMECAP-run funds.

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feel, on a qualitative basis, that there are better places to invest your money. This momentum strategy is quanti- tative, not qualitative, in nature. As noted in the October 29 Hotline as well as last month’s newsletter, while U.S. Growth is officially the October Hot Hands fund, I’m sticking with my PRIMECAP-run funds rather than selling and switching. I still have ques- tions about the long-term viability of the multimanager approach at U.S. Growth. n

DAN’S DO-IT-NOW ACTION RECOMMENDATIONS 4 Keep an eye on the distribution calendar and don’t “buy a dividend.” Most of the Model Portfolio funds are keeping distributions small. (See page 6) 4 U.S. Growth was reborn five years ago and is on a better path (See page 13). It’s also officially the October Hot Hands fund, but, for my money, I’m sticking with the PRIMECAP Management-run growth funds. (See page 1) 4 Robos are on the rise, but do you want to hand your portfolio off to a machine? (See page 12)

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

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