(PUB) Vanguard Advisor

off, you could start the youngster in a STAR account for just $1,000. While I’m not a huge fan of STAR because of the amalgam of funds it cobbles together, its one saving grace is that low, low minimum. My preference, however, would be to go directly to one of the PRIMECAP Odyssey funds (POAGX, my favorite for kids, is now closed, so go for POGRX), where the IRAminimums are just $1,000. Or, if you have a personal represen- tative at Vanguard, see if they’ll waive the minimum on Selected Value or Dividend Growth for your child or grandchild. Obviously you won’t be making regular contributions to the IRA, since its deposits are contingent on the child’s income stream, but if Vanguard’s smart, they’ll see this as a way tograb a potential long-term client at an early age. Remember, the longer you or your childrenwait, the smaller your potential compounded earnings. Of course, with income comes taxes, and your children will need to begin filing their own tax returns. And, as I mentioned earlier, contributions to a Roth IRA are not

RealCompounding: Wellington

RealCompounding: TotalBondMarket

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$1,000 per year $1,500 per year $2,000 per year $2,500 per year

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madepre-tax, as theywouldbeona tra- ditional IRA.Also, be aware that if you do help your child by contributing on their behalf, the total amount put into the IRA cannot exceed their total earn- ings in any given tax year. (This will be more of a concern for the youngest investors.) Inanycase, helping toput your teen- age child or grandchild on the road to a more comfortable retirement may truly be one of the best gifts you can make, and it will be one that keeps on giving year after year. n

yourself. Remember, the child may earn $1,000, but with taxes taken out, they will not bring it all home. That doesn’t keep you from putting a full $1,000 into aRoth for them. Maybeyoucan’t afford toadd the full amount. Consider making a deal with your teen to match a portion of their earnings that they add to the Roth as well. If the teencontributes$250,maybe you’ll contribute $500. Grandparents, obviously, canget into this act. Finally, there’s the issue of themany $3,000 minimums at Vanguard. First

will probably be the areawherewewill create themostwealth, in terms of stock performance and in terms of total return.

nobodywill bebetter positioned for that and forwhat I thinkhealth care is going to look likeover thenext 25 years than this company.

When you say “we,” is that the fund, or ingeneral, thehealth care sector in themarket? I’d say for sure the fund, and I think you couldextend that out, but I’m just going to speak for the fund. I think—and I’mnot saying thiswith blinders on—that thehealth care sector fitswhatwedo sowell, and I do think thedemographic tailwindbehindhealth careand the science that’s emergingandall of that you readabout every day…I do think that is going toplant the seeds for really powerfulwealth creation.Wewant to beexposed to that. Thehealth teamhas for a long timehadabigposition in UnitedHealth, and youhaveabigposition inUnitedHealth.When I see that stock, I think somebodyhasgot tobedeeplyknowl- edgeableabout theAffordableCareAct. I agree. I think,when this isall saidanddone,what thegovernment will conclude is thatweneed theunparalleledexpertiseof a company like this. Theothermanaged care companies, but specifically this companyand everything it hasbecomeover the last five years—not only in termsof its benefitsbusiness,which isenormous, butOptum,which is its servicebusi- ness—will grow in importanceexponentially. I agree100%with youon that, and that’soneof those themes that I’m thinkingabout inhealth care: Which companiesaregoing tomanage the infrastructureof theACA?And

Don,who is your number two?Whopulls the triggerwhen you areon vacation? When I’m on vacation, any trigger-pulling is ultimatelyme. I never really go completely on vacation, so anytimewe are going to do anything with the portfolio, itwon’t be donewithoutme knowing about it. Butwe do have people on the team—one person in particularwhoworks very, very closelywithme is Peter Fisher. I’m not sure I’d call him a hit-by-the-bus guy, but if that happened he would certainly be in a position tomanage the portfolio very effectively. So he is the guy that I lean on quite heavily every day. But, like I said, 100% of the decisions continue to bemade byme. 100% of the responsi- bility ismine. And that’s theway it’s going to be for a long time. Nobody else is going to bemaking decisions exceptme—for better orworse. You’vehit $20billion inassets. Do youhaveanykindof capacity constraint that youare thinkingof? Iwouldmeasure the riskof capacitysimplybyhowhard it is forme todo what I amdoing. So, if I have things Iwant todo in theportfolioand I can’t do thembecauseof thesizeof theportfolio, thatwouldsignal tome that I haveacapacityproblem. I don’t see that at all. So, I still feel prettygood.

Thanks, Don. Asalways, it’sbeenan insightful conversation.

The Independent Adviser for Vanguard Investors • April 2014 • 15

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