(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. Jeff gradu-
ated 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 2015’s Hot Hands fund, PRIMECAP Core, is a long-term winner. If you don’t already invest
alongside the PRIMECAP team, now is a great time to do so. (See page 1)
4 Diversification is once again under the gun, but my Model Portfolios are the proof in the pud-
ding that diversification works over the long run. (See page 4)
4 Vanguard has once again filed for a municipal bond index fund. It’s due out in the second quar-
ter, but why wait for this index when Long-Term Tax-Exempt has more than held its own
against the benchmark? (See page 12)
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!
14.3% loss for the index. This is
particularly encouraging, since the one
thing you worry about when pursuing
a mechanical strategy like this one is
whether you ever suffer tremendous
losses, something to which other “per-
sistence” strategies are not immune.
Over 29 five-year periods, Hot Hands
returned an average 16.4% per annum
(compared to 10.9% for the index). And
over the 24 ten-year periods, the results
are just as compelling, with an average
annual return of 16.8% (10.6% for the
index) and a worst 10-year annualized
return of 7.7% versus a 0.7% loss for
the market.
Say No to Being Contrary
As the graph on page 15 also makes
crystal clear, investors who bought into
the contrarian investing theory—buy-
ing the prior year’s worst performer—
aren’t doing themselves any favors.
While there may be a time and place
for contrarian thinking, this isn’t one
of them.
So, how can Vanguard investors like
us make use of this Hot Hands phe-
nomenon? First, this isn’t meant to
be an all-or-nothing strategy. Again, I
don’t recommend that you put all of
your money into one Hot Hands fund.
We need to use our heads as well as our
history books. But the Hot Hands strat-
egy does lead us to funds that can serve
as one component of a well-rounded
portfolio.
For 2015, I haven’t recommended
a shift of any Model Portfolio assets
because we already own the terrif-
ic management team at PRIMECAP
Management through PRIMECAP Core
in our Income Model Portfolio, and
Capital Opportunity in both the Growth
Model Portfolio and Conservative
Growth Model Portfolio.
Now as there still may be a few of
you who never took advantage of the
PRIMECAP team’s prowess while their
funds were still open, you can still get in
while the getting’s good by purchasing
PRIMECAP Odyssey Stock (POSKX), a
near-clone of PRIMECAP Core, through
Vanguard Brokerage or direct at odys-
seyfunds.com, as well as PRIMECAP
Odyssey Growth (POGRX), which is
more like the original PRIMECAP fund.
Either one will serve you well. I own
both, as well as their now-closed little
sibling, PRIMECAP Odyssey Aggressive
Growth (POAGX). Let’s see what 2015
brings. n
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