(PUB) Vanguard Advisor

with Total Stock Marke t and Total International Stock both gaining 2.1%. But there has been plenty of churning beneath the surface, as the areas of the market that lagged last year have led the way so far in 2014. Who would have thought that with the Fed beginning to taper its asset purchases, Extended Duration Treasury ETF would be up 15.5% to start the year? Or that interest-rate-sensitive stock funds like Utilities ETF and REIT ETF would also be leading the way, with each gaining 13.7%? I didn’t see that coming. I’m also not expecting that to continue in the long run, but it just goes to show you how hard it is to predict the rotational swings in the market over short time periods. Speaking of keeping an eye on the horizon while taking the near term in stride, April was, admittedly, a disap- pointing month, as our Model Portfolios posted market-lagging declines ranging from -0.1% to -1.4% compared to Total Stock Market’s 0.1% gain. Some of our most profitable long-term holdings con- tributed to the underperformance. Health Care declined 1.9% in April as the red- hot biotechnology sector cooled off. An overweight to the health care and tech sectors also weighed on PRIMECAP Core and Capital Opportunity , off 1.5% and 3.2% respectively. Selected Value lost 0.6% as stocks of mid-sized companies declined more than those of larger companies. Note, however, that our buffering position in Short-Term Investment- Grade did its job of lessening the blow of falling stock prices, finishing the month with a gain of 0.3%. High-Yield Corporate continued to do well, up 0.6%.

Easy PAS Toward the end of April, Vanguard rolled out a new service to investors: Vanguard Personal Advisor Service (PAS). If you’ve got at least $100,000, Vanguard will provide you with invest- ment advice and financial planning for just 0.30% a year. The program began as a pilot in 2013, and with $755 mil- lion in client assets at the end of the year, it’s now ready for primetime. PAS has drawn comparisons with a new breed of “robo-advisers” built around web-based tools designed to automate your investments. You go online, fill out a questionnaire and based on your answers, algorithms spit out a portfolio—typically index-based and auto-rebalanced. In some cases, tax losses are harvested automatically. Fees are typically in the 0.15% to 0.25% range. While I haven’t used any of these services, it’s axiomatic that with a robo-adviser you get what you pay for—very little. Vanguard’s new service has the potential to be more than that, as you’ll have an actual person you can talk to, though whether they’ll simply feed you predigested pabulum versus solid, individualized advice remains to be seen. Does that mean Vanguard’s PAS is for you? If you are comfortable with an index-oriented portfolio and want a touch of hand-holding, you could do far worse. That said, you know that I believe that with a little work we can build a portfolio of the best active managers in Vanguard’s stable that will run circles around the index over the long haul. The Model Portfolios are the proof in that pudding. n

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The way to beat high-frequency trading isn’t to try to play the game and get faster, but to slow down: Trade less, ignore the noise and focus on the long term. Let the traders at Vanguard, PRIMECAP, Wellington and the other shops that manage our money handle the trading platforms. All of these signals tell me that although we are more than five years from the 2009 market bottom, with stocks having rallied some 200% and the Dow at a high, investors are not overly bullish. Typically, as the bull tires, investors concerned about missing the next leg up see every market dip as a buying opportunity. With all the worries about “corrections” and “rigged” mar- kets, I don’t believe investor sentiment is there yet. That said, it has been more than two and a quarter years since the last time stocks were 10% below their most recent high, and I can promise you there will be another correction—just don’t ask me when. I, for one, would wel- come a correction of 10%, as it would scare some people out of the market who shouldn’t be there in the first place, and might present some very nice buy- ing opportunities for our managers— because, as you know, when the markets tumble, the babies get thrown out with the bathwater. Valuations may currently be fairly full, but a stock stumble cou- pled with growing earnings means those valuations could come down to fairer levels without a major upheaval. Rotation Speaking of which, on the surface, stocks have been fairly calm this year,

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 Carla Lake - 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)

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The Independent Adviser for Vanguard Investors • May 2014 • 3

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