(PUB) Investing 2016

4. Many of Vanguard’s in-house fund managers don’t invest a nickel in the funds they run. I count 21 Vanguard managers out of a total of 33, or nearly two-thirds, who have no money invested in any of the funds they run. That’s depressing. While board members report their holdings in increments rising to just $100,000, portfolio managers are required to report holdings in different categories, ranging from $1 to $10,000 up to “over $1 million.” Digging into the numbers, Pam Tynan is the only in-house manager who has more than $1 million in a fund she runs. In this case, it’s Short-Term Tax-Exempt , and her leadership in this regard is a thing of the past. Tynan retired >

at the end of February. Three Vanguard funds’managers have between $500,001 and a million dollars invested alongside shareholders. Five funds’ managers have between $100,001 and $500,000 invest- ed. Another four funds have managers with between $50,001 and $100,000 invested. And that’s about it. Those numbers have been improving at a snail’s pace and still leave plenty of funds without any manager invest- ment. To be fair, there are legitimate reasons why a manager may not be invested in the fund he or she runs. For younger managers, a bond fund, for instance, may not match up with their time horizon and goals. Well-paid, high- tax-bracket managers might not want to own the taxable bond funds they run, preferring to hold something that is tax- exempt. Some of Vanguard’s managers with indexing in their bones probably invest the bulk of their money in the “core” funds like Total Stock Market or Total Bond Market Index , yet don’t manage those funds. Any way you slice the data, there is plenty of room for Vanguard port- folio managers to invest along- side shareholders. One glance at the holdings of outside managers from PRIMECAP Management or Wellington Management, and you’ll see what eating your own cooking really looks like. n

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When I started this newsletter in 1991, I had to thumb through paper SEC filings and copy fund data by hand. But now, thanks to advances in technology and the efforts of our team at InvestorPlace, Jeff and I are able to bring you an unprecedented research tool for Vanguard investors: The Independent Vanguard Fund Analyze r. The Fund Analyzer takes everything you know from our monthly newsletter and annual guide- book to a whole new level. Like our guidebook, it contains comprehensive data on every Vanguard fund we track. And like our newsletter, it’s updated every month. (Some data is even updated daily.) But unlike either, it gives you direct access to a suite of online, interactive charts, tables, and other analytical tools created directly from our in-house database—and it’s designed to work with any computer or mobile device you own. It’s like being right there in our office with us, as your own inde- pendent fund analyst on our research team, with our proprietary risk and return statistics like rolling returns, relative returns, Maximum Cumulative Loss (MCL), and many more at your fingertips. And the best part is, you can get the Fund Analyzer for only $199 a year. For details on how you can try it risk-free for 60 days, visit www.thefundanalyzer.com/JoinNow or call 800/211-7641 and mention code MT9207 .

Eating Their Own Cooking? Hardly!

Over $1 million

$500,001-$1,000,000

$100,001-$500,000

$50,001-$100,000

$10,001-$50,000

$1-$10,000

$0

0

5

10

15

20

25

Vanguard Managers Investing in Their Own Funds

DO-IT-NOW ACTION RECOMMENDATIONS 4 After nearly 17 years, it’s time to say goodbye to Selected Value . (See page 1) 4 Everyone wants a smaller tax bill, but don’t lose sight of the real aim: Maximizing after-tax returns. (See page 6) 4 I don’t take everything Vanguard says at face value, and neither should you. The truth is there are a few places Vanguard could stand to improve upon. (See page 14)

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