(PUB) Vanguard Advisor

Market or Federal Money Market . Sell a fund or ETF, or receive interest on a bond, and that money will go into the new settlement account. Want to write a check on it? You’ll need new checks. Vanguard says that you can still hold onto your old money fund and designate it as an “alternative redemption” fund, which means it’ll be your backup if you write a check and overdraw your new settlement account. Thanks, but aside from the confusion, that doesn’t really help the investor who wants all her cash in the Treasury fund, for instance, and not something else. Ultimately, having all yourVanguard- held assets under a brokerage umbrella makes sense to me. The problem is the path from here to there is riddled with potholes. Vanguard’s new broker- age account pamphlet, which you can find online, isn’t completely clear. You won’t be required to make this switch now, but eventually it sounds like all Vanguard shareholders will be moving to this brokerage model. Finally, I wanted to let you know that yes, my team and I do read all of the emails and letters you write to us at AdviserOnline , and yes, I do want to respond to as many as I can. Of course, as you may suspect, the number of questions and comments (including some very nice ones, thank you) is quite large. One thing I am learning from your questions is that it’s important to keep returning to the basics—with a Vanguard flavor. Jeff and I will continue to do that in the weeks and months ahead. Our story on compounding, which begins on page 12, is an effort in that direction. Enjoy. n

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LeadershipHas Rotated in 2014 (Year-to-Date Returns Through August)

What’s particularly interesting to me is the broad rotation we’ve experienced in the first eight months of this year. During the first quarter, U.S. small stocks were by far the best performers, and now they are the laggards. Foreign developed stock markets took the lead for a while. And after an almost 10% decline, emerging markets have come roaring back and are now outperform- ing by a wide margin, as the chart to the right shows. Don’t forget what the naysayers were shouting about junk bonds, either. High-Yield Corporate , which dropped 1.2% in July (its first losing month in 11), came back with a 1.6% gain in August as sentiment suddenly shifted and Wall Street started buying again. You and I didn’t panic, and we’ve made good money in the sector. And for all the claims that health care stocks would begin to falter after their robust performance early this year, Health Care remains up 19.0% after generat- ing a further 4.1% gain this past month. I expect diversified portfolios such as ours, with year-to-date gains of 7.8% to 8.4% and allocations to great managers in the large-cap, mid-cap and health sectors, among others, to continue to provide a good ride through the global turmoil, whether it’s geopolitical or market-induced. Going for Brokerage Vanguard has taken a page from my playbook and has a push on to get investors to merge their individual fund accounts under a brokerage account umbrella (with separate accounts for IRAs, joint accounts, and so on). You’ll

15%

SmallCap Index Total Stock Market

Emerging Markets Index Total Int’l. Stock Index

10%

5%

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-10%

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have SIPC protection for your fund assets up to $500,000 (which you didn’t have with the regular fund account), and it will make transacting business speedier (they say). Plus, the year after you make the switch, you’ll receive a consolidated tax document for invest- ments held at Vanguard. But there are several devils in the details. They aren’t deal-killers, but this isn’t seamless either. For instance, if you have given someone like a trustee or investment adviser access to your account, you’ll have to redo those permissions on your new brokerage accounts. The permissions don’t carry over. Also, if you’ve been taking dis- tributions from one fund and having them deposited into another fund, that service is going away. You will have to make all of those trades manually. With the new brokerage account, you’ll receive a new money market fund—either Prime Money Market or Tax-Exempt Money Market — that will become your “settlement account” even though you may already be investing in a state tax-free money fund, Admiral Treasury Money

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 - Assistant Managing Editor Louisa Dorado - Marketing Director Mary Taylor - 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)

The Independent Adviser for Vanguard Investors (ISSN 1093-4200) is published monthly for members of the Fund Family Shareholder Association by InvestorPlace Media, LLC, 9201 Corporate Blvd., Rockville MD 20850. A one-year membership is $229 (foreign, add $18). POSTMASTER: Send address changes to The Independent Adviser for Vanguard Investors/Fund Family Shareholder Association, c/o InvestorPlace Media, LLC, 700 Indian Springs Drive, Lancaster, PA 17601. The FFSA is an independent organization dedicated to providing investors with intelligent and objective advice about the Vanguard family of mutual funds and services. If you have questions regarding your membership, call 800/211-7641 (service@adviseronline.com). While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can the publication be considered liable for the future investment performance of any securities or strategies discussed. The newsletter, hotline and associated publications provide information of general interest and are not intended to provide individualized investment advice for any subscriber or specific portfolio. Subscribers are urged to review the full disclaimer and securities holdings disclosure policy associated with this publication at www.adviseronline.com/disclosure-disclaimer. html or call 800-219-8592 to receive a copy via mail. Vanguard and The Vanguard Group are service marks of The Vanguard Group, Inc. FFSA and InvestorPlace Media, LLC are not affiliated in any way with The Vanguard Group and receive no compensation from The Vanguard Group, Inc. Copyright 2014 by Fund Family Shareholder Association. Reproduction in whole or in part is prohibited except by written permission of FFSA.

The Independent Adviser for Vanguard Investors • September 2014 • 3

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