(PUB) Vanguard Advisor

S P E C I A L E X PA N D E D 1 6 - PA G E I S S U E

APRIL 2014

Model Portfolios................................................................2 March Special Distributions..............................................3 TheGap in Investor Returns.............................................4 Buy High!..........................................................................6 ExplorerValue Stays Small................................................7 Performance Review.................................................... 8-11 Interview: Donald Kilbride...............................................12 Dan’s Do-It-NowAction Recommendations....................16

PIN 3461

Rational Expectations HASTHESTOCKMARKET suddenly becomemore rational?

AVERAGEVANGUARD INVESTOR* March: 0.4% YTD: 2.0%

-3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0%

High-flyingbiotechnology stocks gaveup10.6%of their gains inMarch asmomen- tum and traders took a chill pill. Thehigh-flyingmarket for initial publicofferings (IPOs) reversed course.KingDigital Entertainment (maker of the extraordinarilypopularCandy CrushSagagame) offered its shares at $22.50 andpromptly tumbled19.2%.And, in a broader sense, themarket that fell in January and rose inFebruary simplymuddled through inMarch, leaving investors little to show for the first quarter’s rollercoaster ride. Marchmay have come in like a lion, but it went out like a lamb. TheDow Jones IndustrialAverage gained 0.8% for themonth, but is off 0.7% for the year. The NASDAQComposite dropped 2.5% for themonth, and is up just 0.5% for the year. I’m calling this a rationalmarket in part because neither earnings, nor economic fun- damentals, nor news of a blockbuster treatment for cancer orAlzheimer’s have given investors any reason to bid prices higher thanwhere they stood at their recent records. TheDow remains 0.7% off itsDec. 31 record close, while the S&P 500 index did post a new high onMar. 7 before backing off 0.3%.And by theway, though HealthCare lost some ground, it’s still up a very healthy 8.8% for the year. That isn’t to say that therewasn’t news tomove themarkets. The only thing crazier thanVladimir Putinmay be the fact that theDow’s two biggest up days duringMarch came on theTuesday after the SundaywhenRussia invadedCrimea, and on theMonday after the SundaywhenCrimeans voted to secede. TheCrimeanmess is a geopolitical quagmire, but it’s a longway from having a discernible impact on valuations, beyond a few companies thatmay be relying onRussian contracts.

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*See the footnotes onpage 2.

DOWJONES INDUSTRIALS MarchClose: 16457.66

14000 14900 15800 16700 17600

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STANDARD&POOR’S500 MarchClose: 1872.34

1500 1600 1700 1800 1900 2000

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NASDAQCOMPOSITE MarchClose: 4198.99

3000 3300 3600 3900 4200 4500

SEE RATIONAL PAGE3 >

RETIREMENT OpenYour Teen an IRA

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3-MO.TREASURYBILLYIELD MarchClose: 0.03%

0.00% 0.02% 0.04% 0.06% 0.08% 0.10%

EVERYYEAR, when Iwrite about opening an IRA for your teen or grand-teen, I hear fromFFSAmembers, friends, and even familywho say, in a nutshell, “Great idea.”And it is. Helping a young person get on board the retirement trainmay not get you lots of appreciation today, but trustme, the beneficiary of your forward thinkingwill thank you for years to come as theymove into adulthood. Whether you call themMillennials, GenYs, or EchoBoomers, the Internet generation is amassive group of teens and 20-somethingswho could use a kick in the pantswhen it comes to planning for retirement. I know it sounds a bit crazy to talk to teenagers about retirement and IRAs. I can hear the howls of laughter. “Retirement?” you ask. “Who are you kidding?The kid couldn’t

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10-YR.TREASURYNOTEYIELD MarchClose: 2.72%

1.6% 2.0% 2.4% 2.8% 3.2%

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SEE RETIREMENT PAGE12

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A PUBLICATION OF FUND FAMILY SHAREHOLDERASSOCIATION • VOL. 24, NO. 4 The Independent Adviser for Vanguard Investors and FFSA are completely independent of TheVanguardGroup, Inc.