(PUB) Investing 2016

itself within the industry as a leader in small-cap indexing, the historical performance of its indexes makes them notable laggards compared to other providers’ indexes. All three of these options are avail- able as ETFs, and Vanguard will let you trade them for free. That’s a good deal, in my book. Russell 2000 ETF , Hold S&P SmallCap 600 ETF , Hold SmallCap Index , Hold Vanguard is hoping that Strategic SmallCap Equity will give these >

on top of that, PRIMECAP Odyssey Aggressive Growth is also closed. So, as I said at the start, indexing may be the way to go. Vanguard offers three index options for investors looking to add small- cap growth stocks. Of the three, S&P SmallCap 600 Growth ETF is my top choice, as S&P’s commitment to higher-quality fare tends to work to its advantage over a full market cycle. I’d also pick the CRSP index that backs SmallCap Growth Index over the Russell 2000 Growth ETF . Though Russell has made a name for

stocks to meet the objective. The bot- tom-right chart on page 14 plots the rel- ative performance of Strategic Equity against Extended Market Index and MidCap Index . When the line is ris- ing, Strategic Equity outperforms. Strategic Equity has been on a winning streak for the past five or so years, as its 15.5% annual return over that period is ahead of Extended Market Index’s 13.3% pace and MidCap Index’s 13.9% annual gain. But what is apparent to me in review- ing the chart is that Strategic Equity has seen long stretches when it outper- formed and then underperformed these benchmarks. And over the full time period, simply holding MidCap Index would’ve been a better option, without worrying about Vanguard’s computers developing a bug. Strategic SmallCap Equity Hold. Like its big brother, Strategic SmallCap Equity is a “quantitative” fund, where the stock picking is com- puter-driven. Just to be clear, those computers are programmed by real-life human beings, so this is not an index fund. As its name implies, the fund focuses exclusively on small stocks. Performance runs hot and cold. Strategic SmallCapEquity, which had put together a nice run of performance since the middle of 2009, ran into a wall the past year, with its 6.5% gain over the past 12 months lagging behind SmallCap Index ’s 9.2% return and SmallCapValue Index ’s 11.9% advance. Rather than fret over whether performance will turn around here, why not just stick with SmallCap Index or SmallCap Value Index? Both index funds have outperformed Strategic SmallCap Equity since its inception. INDEX FUNDS Russell 2000 Growth ETF , Hold S&P SmallCap 600 Gro. ETF , Buy SmallCap Growth Index , Buy With Capital Opportunity closed and now tilted more towards large- and mid- cap stocks, there isn’t really a go-to actively managed fund in the small- cap growth space at Vanguard. And

DISTRIBUTIONS TO COME Fall’s Dividend Payouts

WITH SUMMER COMING TO A CLOSE, funds and ETFs that pay out quarterly will distribute interest and dividends earned in the past three months, after expenses, to shareholders. Keep an eye on the calendar and check the Hotline as Vanguard begins releasing actual distribution dates. Remember that for tax reasons, you don’t want to “buy a distribution,” so if you’re planning an investment in a taxable account, please hold off until after the “record date,” which is the date ownership is determined for distribution purposes. (If you’re investing in a tax-deferred account, you don’t need to worry about this.) The funds or ETFs scheduled to distribute are listed below. Note that even though Short- Term Inflation-Protected Securities Index is supposed to be a quarterly payer, it hasn’t paid out a quarterly dividend since its inception, storing up what little it’s earned for a year-end dividend—though the fund couldn’t even manage that last year. With inflation subdued, short- term Treasury yields still extremely low, and the fund’s yield a reported -0.43%, there’s prob- ably still not much income for the fund to actually pass on to shareholders. So don’t hold your breath. The same goes for big brother Inflation-Protected Securities , which paid a fractional distribution last June but has skipped plenty of quarterly payouts the past few years. The funds and ETFs that will pay out in September include the following and, unless other- wise noted, both fund and ETF shares will pay distributions during the month: 500 Index, Balanced Index, Consumer Discretionary Index, Consumer Staples Index, Convertible Securities, Developed Markets Index, Dividend Appreciation Index, Emerging Markets Stock Index, Energy Index, Equity Income, European Stock Index, Extended Duration Treasury ETF, Extended Market Index, Financials Index, Global ex-U.S. Real Estate Index, Growth Index, Health Care Index, High Dividend Yield Index, Industrials Index, Inflation- Protected Securities, Information Technology Index, International Dividend Appreciation Index, International High Dividend Yield Index, LargeCap Index, Materials Index, MegaCap ETF, MegaCap Growth ETF, MegaCap Value ETF, MidCap Growth Index, MidCap Index, MidCap Value Index, Pacific Stock Index, REIT Index, all seven Russell ETFs, S&P 500 Growth ETF, S&P 500 Value ETF, S&P MidCap 400 ETF, S&P SmallCap 600 Growth ETF, S&P SmallCap 600 Value ETF, Short-Term Inflation-Protected Index, SmallCap Growth Index, SmallCap Index, SmallCap Value Index, Social Index, STAR LifeStrategy Conservative Growth, STAR LifeStrategy Income, Target Retirement Income, Tax-Managed Balanced, Tax-Managed Capital Appreciation, Tax- Managed SmallCap, Telecommunication Services Index, Total International Stock Index, Total Stock Market Index, Total World Stock Index, Utilities Index, Value Index, Wellesley Income, Wellington, World ex-U.S. Index, World ex-U.S. SmallCap Index.

The Independent Adviser for Vanguard Investors • September 2016 • 15

FOR CUSTOMER SERVICE, PLEASE CALL 800-211-7641