(PUB) Investing 2016

MODEL PORTFOLIOS Active Wins!

The Ultimate Fund Guide

VANGUARD FOUNDER Jack Bogle was wrong when he said investors should opt for indexing over active management, but he was totally cor- rect when he wrote on the difference that 1% in performance can mean over time. His words: “Seemingly small dif- ferences in annual rates of return can result in enormous differences in total return over long periods of time. Do not ignore the magic of compounding.” And how. With December’s end marking 25 years of performance for my Model Portfolios , I think it’s fair to say that active management has more than kept up its end of the bargain for both you and me. Since inception at the end of 1990, the three original Model Portfolios have generated compounded rates of return

ranging from 8.7% for the Income Model Portfolio to 11.7% for the Growth Model Portfolio . By compari- son, 500 Index has returned 9.7% over the period, and Total Bond Market Index returned 5.9%. The Model Portfolios’ returns were built on the backs of terrific active managers, low costs, and a modicum of trading among funds. And they kept risk in check. Despite outperforming the stock market by more than 2% per annum, the Growth Model Portfolio was slightly less volatile than the over- all stock market. In fact, when Jack Bogle talked about an additional 1% in annual gains, I doubt he considered what would happen if an investor actu- ally earned 2% more! The numbers speak for themselves. n

WITHOUT TURNING ON A COMPUTER, without even looking up a telephone number, you can have at your fingertips all the data on your favorite Vanguard funds—with the new FFSA 2016 Independent Guide to the Vanguard Funds . This year, we have more data than ever, including our proprietary risk and return statistics like rolling returns and Maximum Cumulative Loss (MCL), plus our take on new funds Vanguard plans to launch, such as Core Bond, Emerging Markets Bond, International Dividend Appreciation Index and International High Dividend Yield Index . Even with our huge computer files and access to fund managers, my co-editor Jeff DeMaso and I still find ourselves thumbing through the annual guide to find that quick MCL statistic, fund correlation, or even a total return figure for 2006. My 2016 Guide is a great resource for me, and for you. Call Customer Service at 800/211-7641 for all the details on how to sign up for the guide pre-publication.

25 Years of Model Portfolio Returns

——— ANNUALIZED ——— ——— CUMULATIVE RETURNS ——— 10-yr 15-yr 20-yr Inception 10-yr 15-yr 20-yr Inception 7.7% 7.0% 11.0% 11.7% 109.9% 174.7% 699.6% 1502.6% 7.3% 6.5% 9.2% 10.1% 101.8% 158.0% 484.5% 1006.4% 6.4% 6.0% 7.7% 8.7% 85.7% 140.5% 337.4% 699.0% 7.3% 6.9% 8.7% — 101.5% 170.4% 429.4% —

Growth

Conservative Growth

Income

Growth Index

500 Index 7.2% 4.9% 8.1% 9.7% 100.1% 104.4% 373.7% 912.2% Total Bond Market Index 4.4% 4.7% 5.1% 5.9% 53.2% 99.6% 171.6% 323.1%

DO-IT-NOW ACTION RECOMMENDATIONS 4 Gains were hard to come by in 2015, but that doesn’t tell us anything about next year or the long run—which is what really matters. Stick to your plan with winners like Dividend Growth and International Growth . (See page 1) 4 Tune out those economic and market pundits. (See page 4) 4 Don’t let the fact that retirement contribution limits have stalled out discourage you from funding your IRA. Do it now. (See page 13)

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

www.adviseronline.com