(PUB) Investing 2016

these and will be adding them to our Performance Review pages when they finally arrive, but I wouldn’t rush to invest in either fund. One last note. I wanted to say a big “Thank You” to those who wrote about your service issues at Vanguard. Some of you wrote to say you had had a smooth transition with your account consolidations. Terrific. Others, how- ever, complained that the switch to a new money market fund and the lack of checks caused them to bounce checks to the IRS, which is not a good thing. Vanguard obviously dropped the ball on customer service there, and from what you tell me, its reps haven’t been sympathetic to your travails. I’m really sorry to hear that, and remind you that you have a couple of options—one is to check, double-check and triple- check everything that Vanguard does. The other is, unfortunately, to move your account. I had one letter from a former Vanguard investor who says his multimillion-dollar account was so bungled that he moved everything he had to Fidelity. He still uses Vanguard funds, but says he’s much happier with Fidelity’s service. I think it’s worth mentioning yet again that when a com- pany like Vanguard makes its reputa- tion on low, low costs, something has to give, and that’s often service. Finally, from our “check your sourc- es” file, Vanguard has once again trot- ted out that old quote attributed to Albert Einstein that compound interest is the eighth wonder of the world. As good as it sounds, Einstein never said it. I mentioned this to Vanguard. The response? Silence. Having been caught, I wouldn’t be surprised if that misquote is finally put to rest. n

prices are a boon, and eventually the benefits of lower oil prices will start to come through the system. Earnings suggest the economy remains in solid shape, particularly once you’ve taken oil company declines out of the equation. In particular, com- panies tied to the consumer continue to do well. And interest rates and inflation remain low, which means you can bor- row cheaply. In Malvern Vanguard had a busy January, trim- ming the manager ranks at Explorer and Morgan Growth , but adding a manager to Small Company Growth Annuity (see page 7 for more). A shake-up in Vanguard’s Quantitative Equity Group saw Binbin Guo and Anatoly Shtekhman named as co-man- agers to various funds, replacing James Troyer and Michael Roach. Vanguard also shook up the managers on a num- ber of their index-based annuities. As the month closed, Vanguard launched an Institutional Select share class for three core index funds with operating expenses of just 0.01%—or 1 basis point. Three others will charge 0.02% to 0.045%. Of course, you’ll need a minimum of $3 billion to invest in the new share classes, or $5 billion for 500 Index’s and Total Stock Market ’s shares. That’s billion with a “b.” Pension funds will love this, and it’s a real stick in the eye to Vanguard’s competitors. Meanwhile, Vanguard delayed the launch of its two new foreign stock index funds (and ETFs), International High Dividend Yield Index and International Dividend Appreciation Index . We’ll have more to say on

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1.1%, respectively. But some of our managers did lag in January. Health care stocks have historically held up relatively well in tough markets, but that wasn’t the case in the first 19 trading days of the year. Health Care fell 8.9%, and the weakness in the health care sec- tor weighed on Capital Opportunity , which also declined 8.9%. Also, I’ve received a number of ques- tions about High-Yield Corporate , which fell 1.0%. Jeff and I will have much more to say on this next month, but the short answer is that I’m sticking with High-Yield Corporate, and sug- gest you do, too. So far, I’ve described losses that have already happened. They are behind us. Selling now won’t change that fact. So let’s acknowledge that declines are a natural part of investing. In fact, over the past 115 years, we’ve seen stocks decline 10% or more every 18 to 24 months, on average. And remember that while every bear market was pre- ceded by a correction, not every correc- tion necessarily leads to a bear market. Historically, only one out of three cor- rections has led to a bear market. I suspect you’ve heard the multi- tude of reasons to be scared—slowing Chinese growth, tumbling oil prices, Middle East turmoil, a U.S. election, etc. And while the pessimists always seem to sound smarter because of their absolutism, I think there are plenty of reasons to be optimistic. Oil prices are low. Yes, I see this as a positive. Unless you are a country (think Saudi Arabia, Russia or Brazil) or region (say, North Dakota) which depends on oil revenues, then lower oil

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The Independent Adviser for Vanguard Investors • February 2016 • 3

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