(PUB) Investing 2015

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16 • Fund Family Shareholder Association
Daniel P. Wiener is America’s leading expert on
the Vanguard family of funds. He is founder of
the Fund Family Shareholder Association and
chairman and chief executive officer of Adviser
Investments, LLC, a Newton, Massachusetts,
investment advisory firm (800-492-6868). As
editor of The Independent Adviser for Vanguard Investors, he is
a five-time recipient of the Newsletter Publishers Foundation’s
Editorial Excellence Award. He also edits the annual
Independent Guide to the Vanguard Funds. Mr. Wiener is often
quoted in the nation’s leading financial publications.
Jeffrey D. DeMaso, Editor/Director of
Research, works directly with Dan Wiener
researching and writing the multiple-award
winning Independent Adviser for Vanguard
Investors newsletter. He also leads the analyst
team for Adviser Investments, LLC, helping to
oversee $2.7 billion in assets. Jeff graduated magna cum laude
from Tufts University with a B.A. in economics, holds the
Chartered Financial Analyst designation and is a member of
the CFA Institute and the Boston Security Analysts Society.
DAN’S DO-IT-NOW ACTION RECOMMENDATIONS
4 U.S. stocks and long-maturity bonds may have led the way in 2014, but don’t let recency bias
knock you from your long-term plan. Stick with Dividend Growth and International Growth.
(See page 1)
4 Market predictions are a dime a dozen this time of year—though the record shows that even
10 cents is too high a price. (See page 12) And, as always, I take an honest look at my own
forecasting efforts. (See page 5)
4 Saving limits may have only increased a tad, but don’t let that delay you from funding your
IRA. (See page 13)
The Ultimate
Fund Guide
WITHOUT TURNING ON A COMPUTER,
without even looking up a telephone number,
you can have at your fingertips all the data
on your favorite Vanguard funds—with the
new FFSA 2015 Independent Guide to
the Vanguard Funds. This year, the 25th
Anniversy Edition, we have more data than
ever, plus new Vanguard funds, updated risk
analysis, top holdings, etc.
Even with our huge computer files and access
to fund managers, Research Director Jeff
DeMaso and I still find ourselves thumbing
through the annual guide to find that quick
statistic, a current redemption fee number, or
even a total return figure for 2005.
Best of all, the 2015 Guide will be available
both in print and online, with a user-friendly
interface for easier reading, searching and
quick-reference access to the glossary, index,
and table of contents.
My 2015 Guide is a great resource for
me, and for you. Call Customer Service at
800/211-7641 for all the details on how to
sign up for the guide pre-publication.
25th Anniversary Edition!
of which there have been 25, Capital
Value has averaged a 16.4% three-year
return compared to 16.5% for Total Stock
Market or 18.3% for U.S. Value.
So, that’s where we stand after five
years. As a buy, hold and forget fund,
this is probably not the best choice
in the Vanguard firmament. Vanguard
Chairman Bill McNabb sees Capital
Value as a “complementary” fund rath-
er than a core holding. McNabb, by
the way, doesn’t own any shares in
Capital Value, so he obviously doesn’t
think the fund would complement his
own holdings. Only one of Vanguard’s
directors, Peter Volanakis, owns shares,
and at something between $10,001 and
$50,000 at last report, his position is the
smallest of the more than 20 funds he
reportedly owns.
A Contrarian Strategy
I still think Capital Value’s two man-
agers are worth putting money with if
you’re an aggressive investor who’s will-
ing to buy the fund when it’s looking its
worst and then taking some money off
the top when it’s looking its best.
In fact, Jeff and I modeled what
would happen if you did exactly that—
buying the fund in the month after
its three-year performance began lag-
ging, and selling it as performance
improved. An investor who bought
Capital Value when its three-year return
dropped below the three-year return of
Total Stock Market, and then sold the
fund and bought Total Stock Market
when Capital Value’s three-year return
was better, would have made just six
trades since the end of 2009, when
both managers were fully on board.
Those six trades would have netted
a total return of 142.2% through the
end of December 2014 compared to a
total return of 106.0% for Total Stock
Market and 91.4% for Capital Value.
That’s a whopping big difference.
I can’t guarantee this will always
work to your benefit, but using a con-
trarian strategy to invest with contrar-
ians might be just the ticket to market-
beating returns over the long haul.
Now, that’s a complementary strategy.
And by the way, you can think about
this for a while since, at the present
time, Capital Value’s three-year annual-
ized return of 22.8% is a far sight better
than Total Stock Market’s 20.3% return.
The next “buy” signal will be when
Capital Value begins underperforming
over that three-year window. n
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