(PUB) Investing 2016

Antilla for The Street , Vanguard sent 71 emails about 57 different clients’ financial transactions ranging from $3 to $50,000 to a single shareholder, who says none of the emails were about his own accounts. Vanguard’s response was to term it a “one-time, isolated matter,” and put the blame on an unidentified system error. Listen, whether Vanguard is obfus- cating or not, the simple truth is that when expenses are super-low, some- thing has to give, and one place that may be having an impact is in Vanguard’s information technology department. Hiding behind the veil of a “one-time, isolated matter” may calm investors this time, but I remain unconvinced and recommend, yet again, that you keep a very close eye on your accounts and any transactions that take place within them. If you suspect anything, docu- ment your suspicions and call Vanguard immediately. A note to me won’t hurt, either, because if there’s one thing Vanguard hates, it’s negative press. Jack Bogle was always fond of quoting Supreme Court Justice Louis D. Brandeis, who said, “Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.” I couldn’t agree more. And finally, Jeff and I thought Vanguard had filed documents with the SEC to finally launch the promised International Dividend Appreciation Index and International High Dividend Yield Index funds and ETFs, but so far they haven’t seen the light of day. We’ll keep you apprised in the Hotline . n

six cents per share ($0.0589) after a small increase last year. However, Vanguard now says that 94% of that distribution is a return of capital, ver- sus about 57% last year. What this means is that Vanguard is unable to generate enough current income to keep the distribution even without dip- ping into capital. That’s not surprising, given where interest rates are. But it’s also a problem, since Managed Payout’s entire raison d’être is to pro- duce a consistent 4% dividend regard- less of where it comes from. In my eyes, Managed Payout remains a lousy investment. Vanguard’s directors apparently agree. Not a single one owns, or has ever owned, the fund or its predecessor funds. If the Vanguard board doesn’t see fit to put a single, solitary dollar into Managed Payout, why would you? The fund has the single worst record among Vanguard’s balanced funds and has generated less than half the total return of Wellesley Income since inception. In fact, Vanguard’s disclaim- er on Managed Payout is longer than that for virtually any other fund except Market Neutral , which, of course, is a component of the Managed Payout fund. Investors haven’t been fooled. Managed Payout is barely taking in new money, and assets have stagnated at about $1.6 billion—hardly a roaring success. I’d stay away. As you know, I’ve been warning for some time that you need to keep an eye on your accounts, particularly if you “consolidated” your brokerage and mutual fund accounts as Vanguard has requested you do. Now there’s more to worry about. According to an article by investigative reporter Susan

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worry too much about their short-term financial wealth. Going against the grain of our emotions is what makes investing so challenging. Those challenges remain, particular- ly when you consider all the naysaying that’s making headlines in the current highly charged political environment. Yet, as Warren Buffett writes in his annual letter to Berkshire Hathaway shareholders released this past week- end, “For 240 years, it’s been a ter- rible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and inno- vation will continue to lay more and larger eggs.” Amen. In fact, to my way of think- ing, some of those innovations will come from companies in the tech and medical fields that populate portfolios of funds like Capital Opportunity and Health Care . Aswe head intoMarch, theU.S. econ- omy is on solid ground. Unemployment is low, as are interest rates. Consumer balance sheets are strong, and the hous- ing and auto industries are vigorous. Even inflation has begun to turn higher, and despite what some pundits might say, that’s a good thing for our econ- omy and for the markets. I’m sticking with my fund and overall portfolio rec- ommendations, and suggest you stick with me on that. A Fund for Retirement? Retirement investors must be pretty fed up with Managed Payout . The much-manipulated fund’s 2016 month- ly distribution, paid out mid-month, is unchanged from 2015 at a little under

Daniel P. Wiener - Senior Editor Jeffrey D. DeMaso - Editor/Research Director Seth H. Kennedy - Assistant Editor Amy Long - Vice President and Publisher Billy Currano - Senior Managing Editor David Clarfield - Managing Editor Rachel Johnsen - Editorial Assistant Louisa Dorado - Marketing Director Mary Southard - Marketing Director John Hall Design Group - Design and Production Fund Family Shareholder Association Member, Newsletter Publishers Association Daniel P. Wiener - Chairman James H. Lowell - President (www.FidelityInvestor.com)

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The Independent Adviser for Vanguard Investors • March 2016 • 3

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