(PUB) Investing 2016

the annuity was set up as a fund- of-funds, combining investments in Extended Market Index (about 20% of assets) and Equity Index Annuity (the remainder). I prefer my funds actively managed for the most part, so this fund rates a Hold. If you’re looking to add a smaller-stock component to a portfolio weighted toward Equity Index, which is essentially what a “total” market index does, I suggest trying Small Company Growth or MidCap Index Annuity , described above. International Annuity Buy. A near-clone of the taxable International Growth , this portfolio has actually outperformed the taxable option by a small margin since inception. Like its non-annuity counterpart, Baillie Gifford was added in 2003, and M&G Investments started running a piece of the portfolio in 2008. Where the two funds have differed is that sub-adviser Baillie Gifford manages more of the annuity assets (roughly half), and for a while, the annuity was outpacing the mutual fund despite higher fees. Vanguard finally pushed more of International Growth’s assets to Baillie Gifford, and perfor- mance has since tilted in favor of the cheaper mutual fund. n

substantially outperformed. The annuity got a big jump over Explorer in 1999, when Granahan Investment Management ran it solo. Today it’s a multimanager portfolio, with Vanguard’s in-house equity group added in 2010, and Arrowpoint Partners added this past January. With each sub-adviser now managing a third of the portfolio’s assets, Arrowpoint’s responsibilities are largely coming at the expense of a dwindling Granahan share of the assets. That might sound like a lot of changes, but it’s nothing compared to the game of manager musical chairs Vanguard has played with Explorer’s portfolio. There are currently 15 indi- vidual managers from seven differ- ent firms stirring the pot at Explorer. And all those extra managers haven’t helped performance. Despite higher fees, Small Company Growth Annuity outpaced Explorer by 0.5% a year over the past decade. Total Stock Market Annuity Hold. Despite the similarity in name, Total Stock Market Annuity is not a perfect clone of its big brother, Total Stock Market Index . The dif- ference? Rather than invest directly in stocks, or even a sampling of stocks, >

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DO-IT-NOW ACTION RECOMMENDATIONS 4 Variable annuities often fall short of their promise. But, if you’re convinced an annuity is for you, Vanguard’s are some of the cheapest around. (See page 7) 4 Core Bond is the most appealing of Vanguard’s newest income solutions, but there’s no need to rush into this recently launched fund. (See page 5) 4 Take what you read in the media with a grain of salt. Vanguard expense don’t always fall and “Best of” lists are not the place to start your investment search. (See pages 1 and 5)

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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