(PUB) Investing 2016

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MUNIS Early Success for Tax-Exempt Index Fund

out and for Vanguard’s fixed-income team to settle in with the fund. With this issue, we’re raising that rating to “Buy” to match the active fund, but with one important caveat: Until Vanguard removes the 0.25% front- end load from the fund’s Investor and Admiral shares, I’d only be a buyer of the fund’s ETF shares, if you’re inclined to go in this direction. And that’s how most investors in the new fund have played it. Through

500 Index Admiral T-M Balanced $0.1460 @ $27.73 Admiral T-M Capital Appreciation $0.4830 @ $108.46 Admiral T-M SmallCap $0.1230 @ $48.72 Balanced Index $0.1520 @ $30.60 Consumer Discretionary ETF $0.4740 @ $125.08 Consumer Discretionary Index $0.2470 @ $64.00 Consumer Staples ETF $0.8440 @ $136.47 Consumer Staples Index $0.4180 @ $66.81 Convertible Securities $0.0670 @ $12.52 Developed Markets ETF $0.1750 @ $36.74 Developed Markets Index $0.0420 @ $9.27 Dividend Appreciation ETF $0.3930 @ $83.12 Dividend Appreciation Index $0.1510 @ $33.46 Emerging Markets Stock ETF $0.4500 @ $37.27 Emerging Markets Stock Index $0.2800 @ $23.63 Energy ETF $0.6120 @ $93.41 Energy Index $0.3060 @ $46.36 Equity Income $0.2210 @ $31.26 Europe ETF $0.2650 @ $48.16 European Index $0.1310 @ $26.32 Extended Market ETF $0.3060 @ $89.73 Extended Market Index $0.2120 @ $68.47 Financials ETF $0.2910 @ $49.17 Financials Index $0.1470 @ $24.68 Global ex-U.S. Real Estate ETF $0.3790 @ $55.19 Global ex-U.S. Real Estate Index $0.1410 @ $22.33 Growth ETF $0.3760 @ $111.29 Growth Index $0.1790 @ $57.15 Health Care ETF $0.4980 @ $133.91 Health Care Index $0.2490 @ $66.25 High Dividend Yield ETF $0.4830 @ $71.61 High Dividend Yield Index $0.1860 @ $28.58 Industrials ETF $0.5690 @ $109.21 Industrials Index $0.2920 @ $55.52 Information Technology ETF $0.4030 @ $118.79 Information Technology Index $0.2060 @ $60.64 Int’l Dividend Appreciation ETF $0.1420 @ $56.70 Int’l Dividend Appreciation Index $0.0520 @ $22.73 Int’l High Dividend Yield ETF $0.3740 @ $55.35 Int’l High Dividend Yield Index $0.1440 @ $22.48 LargeCap ETF $0.5500 @ $98.61 LargeCap Index $0.2090 @ $39.50 Managed Payout $0.0589 @ $17.75 Materials ETF $0.5150 @ $105.52 Materials Index $0.2620 @ $53.25 MegaCap ETF $0.4220 @ $73.39 MegaCap Growth ETF $0.3400 @ $87.09 MegaCap Value ETF $0.4310 @ $62.26 MidCap ETF $0.5080 @ $128.20 are rising. Over its first year-plus, there have only been two months, July and September, when both funds lost money. The difference in return each time was less than four basis points, or 0.04%. So how do you choose? Should you favor the index fund over the actively managed intermediate-term muni fund? In my view, it’s really a toss-up. Jeff and I have had a “Hold” rating on the fund since inception as we waited for the portfolio to be built Special Distributions $0.8520 @ $199.17

IT’S EARLY DAYS STILL, and the bond markets are roiled by questions about just how long interest rates will remain at low, low levels, and the bull could turn at any moment. Regardless, Tax-Exempt Bond Index has proven to be a worthy com- petitor to Intermediate-Term Tax- Exempt since its inception just over one year ago. With its slightly higher yield and slightly longer duration (a measure of interest-rate risk), the index fund has managed to outperform over the last 12 months, up 5.7% versus 4.9%. Of course, a reversal in the bond market could bring the returns for the siblings closer to one another, since the index fund’s greater interest-rate exposure will work against it as yields rise. But, as I said, it’s early days, and we have little evidence of how the index fund will operate in real life when rates

MidCap Growth ETF MidCap Growth Index

$0.2200 @ $105.40 $0.0730 @ $41.04 $0.1280 @ $34.65 $0.4930 @ $92.78 $0.1820 @ $36.13 $0.2130 @ $58.70 $0.0360 @ $11.34 $0.5980 @ $85.38 $0.1890 @ $28.74 $0.4980 @ $98.82 $0.4470 @ $106.55 $0.5850 @ $91.62 $0.4070 @ $99.33 $0.4120 @ $108.25 $0.5030 @ $90.50 $0.4980 @ $98.99 $0.8830 @ $196.90 $0.4130 @ $108.74 $0.5670 @ $90.79 $0.4780 @ $103.69 $0.2830 @ $117.98 $0.4230 @ $106.68 $0.5720 @ $121.64 $0.3060 @ $131.83 $0.0740 @ $36.63 $0.2560 @ $57.61 $0.6550 @ $109.79 $0.1490 @ $26.05 $0.0660 @ $13.71 $0.0890 @ $18.62 $0.0710 @ $15.19 $0.0480 @ $12.96 $0.8110 @ $94.84 $0.4140 @ $47.46 $0.2740 @ $46.45 $0.0850 @ $15.09 $0.5390 @ $110.21 $0.2500 @ $53.84 $0.3110 @ $60.01 $0.1230 @ $24.67 $0.9190 @ $111.04 $0.4620 @ $54.41 $0.5580 @ $86.07 $0.2090 @ $33.96 $0.1750 @ $25.90 $0.2460 @ $38.37 $0.2550 @ $44.67 $0.0980 @ $17.84 $0.4690 @ $97.43 $0.1670 @ $37.51

MidCap Index

MidCap Value ETF MidCap Value Index

Pacific ETF Pacific Index

REIT ETF

REIT Index

Russell 1000 ETF

Russell 1000 Growth ETF Russell 1000 Value ETF

Total Return

Russell 2000 ETF

Russell 2000 Growth ETF Russell 2000 Value ETF

$107

Intermediate-Term Tax Exempt Tax-Exempt Bond Index Tax-Exempt Bond ETF

Russell 3000 ETF

$106

S&P 500 ETF

S&P 500 Growth ETF S&P 500 Value ETF S&P MidCap 400 ETF

$105

$104

S&P SmallCap 600 Growth ETF S&P SmallCap 600 Value ETF

$103

SmallCap ETF

$102

SmallCap Growth ETF SmallCap Growth Index

$101

SmallCap Index

SmallCap Value ETF SmallCap Value Index

$100

Social Index

8/15

9/15

1/16

2/16

3/16

4/16

5/16

7/16

8/16

STAR Cons. Gro.

10/15

11/15

12/15

STAR Income

Target Retirement Income Telecom Services ETF Telecomm. Svcs. Index Total International Stock ETF Total International Stock Index

SEC Yield

2.20%

Total Stock Market ETF Total Stock Market Index Total World Stock ETF Total World Stock Index

2.00%

1.80%

Utilities ETF Utilities Index Value ETF Value Index

1.60%

1.40%

Wellesley Income

Wellington

1.20%

Intermediate-Term Tax-Exempt Tax-Exempt Bond Index

World ex-U.S. ETF World ex-U.S. Index

1.00%

World ex-U.S. SmallCap ETF World ex-U.S. SmallCap Index