(PUB) Investing 2016

our money is just fine in all of their capable hands.

are showing positive returns as well. The team at Health Care has fall- en behind Health Care Index , down 3.9%, while the index fund is off 1.2%. And Don Kilbride’s Dividend Growth has had an uncharacteristic period, underperforming Dividend Appreciation Index , up 5.6% to the index fund’s 8.1% gain. International Growth ’s teams, likewise, are lag- ging a bit, off 1.6% compared to Total International Stock Index ’s flat 0.0% return. As a consequence, the Model Portfolios ’ year-to-date returns, rang- ing from 1.9% to 5.1%, are nothing to write home about. What’s winning? Well, Precious Metals & Mining is up 77.4% for the year. Should you buy it? You know my opinion, but let’s hear from Vanguard founder Jack Bogle. When asked about gold this past month, his answer was, and I quote, “No, no, no, no, no.” Yes, the gold bugs are buzzing, for the moment. Once the metal turns down, that annoyance will end. Needless to say, I’m a competitive guy, and I don’t like to underperform. But that’s exactly what happens in a year when gold is on a tear and leading innovators in the health and tech industries are in the dumps. Yet, I know that our broad portfolio alloca- tions are strong, as evidenced by the Growth Index Model Portfolio ’s terrific returns. Yes, the index funds are out- performing this year, but I also know that the managers I’ve just mentioned haven’t suddenly lost their chops. All are index-beaters and are very com- petitive individuals who will not let this underperformance get in the way of continuing to follow their long-term, market-beating strategies. Rest assured,

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and prices are high. Low, low yields (some negative) overseas are a sign of continuing economic malaise. Here in the U.S., they are a sign of per- sistent worry, compounded by what I already said was a host of new unknowns on the global stage. I remain a big fan of Vanguard’s corporate- heavy bond funds, like Short-Term Investment-Grade , up 3.0% this year, and Intermediate-Term Investment- Grade , up 6.1%, for their high qual- ity and low expenses. The comparable tax-exempt funds are also standouts. Remember, a fund like Total Bond Market Index allocates over 40% of its portfolio to Treasury and Agency bonds, and at Intermediate-Term Bond Index that number is over 50%. When Treasurys begin their inevitable slide as yields rise and prices fall, this will be a headwind. By the way, exactly when that will happen is up in the air. Vanguard’s fixed-income team thinks that the Fed will raise rates one or two times later this year. I asked if that prediction, made before the Brexit, had changed, and Vanguard didn’t respond. Semiannual Review It’s been a long, hard six months, and on the equity side, the managers that I have put my money on have been lagging. The PRIMECAP team, in par- ticular, has suffered from declines in their health care holdings along with a host of other losers in, for instance, the airline industry. Capital Opportunity is off 4.6% this year, and PRIMECAP Core is down 0.3%. 500 Index is up 3.8%, and growth-oriented index funds

Consolidation I wasn’t suffering alone with the issues consolidating my brokerage and fund accounts I mentioned in my June 9 Hotline , which included the loss of run- ning balances and the confusion of hav- ing two money markets, not to mention bounced checks. Vanguard says these complaints are few and far between, but what would you expect them to say? Here’s a tip: Apparently, Kenneth Agostinelli works in “Resolution Services,” and he’s supposed to be very good at fixing problems. He’s at (800) 896-7309 ext. 16527. Maybe he can help. And on a last note, I don’t know if we’re witnessing the first baby steps toward greater disclosure from a firm that is all about minimizing it, but in both the Windsor and Windsor II semiannual reports, three portfolio managers out of a total of seven specifi- cally note that their particular portfo- lios underperformed their benchmarks. Now, this doesn’t tell us how much they underperformed, nor does it tell us how the other four managers did, but hav- ing read literally thousands of annual reports, I can say affirmatively this is a new move. Vanguard remains very tight-lipped about how their individual portfolio managers perform—some- thing that a firm that is owned by its shareholders and which makes a lot of hay over multimanagement ought to be more forthcoming about. But if this is a start, rather than a mistake, I’m all for it. The window has been cracked open oh so slightly. Let’s see if the winds of reform continue to blow through. n

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 • July 2016 • 3

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