(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 Vanguard calls their top picks Select Funds, but are they really the best selections for your
money? (See page 1)
4 “Sell in May and stay away” has a nice ring, but investing is rarely so simple, and good luck
implementing the strategy in the real world. (See page 5)
4 ETF proponents claim the tax-efficiency crown, but the numbers tell a different tale. If you’re
going passive, don’t count good old-fashion index funds out. (See page 6)
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popping and leaving the index way
behind in the performance race.)
Not a single Vanguard board mem-
ber owns shares in Balanced Index,
but several do own stakes in Wellesley
Income and Wellington. Wellington
and Wellesley Income’s managers
own lots of shares in their respective
funds—Wellington’s managers both
held stakes totaling more than $1 mil-
lion each at last report. None of the
three managers on Balanced Index own
a share of that fund.
“Select” Fixed Income Funds
When it comes to bond and money
market funds, Vanguard’s Select Funds,
not surprisingly, include Total Bond
Market and Total International Bond,
as well as a smattering of short-term
and intermediate-term options includ-
ing Short-Term Tax-Exempt, Short-
Term Inflation-Protected Securities
Index, Short-Term Investment-Grade
and Intermediate-Term Investment-
Grade. The money market options,
Prime Money Market and Tax-
Exempt Money Market, are obvious,
and unless you’re a resident of a state
for which Vanguard offers a state-spe-
cific money fund, these are fine.
Among the recommended bond
funds, note that there are no long-matu-
rity funds that earn the Select Fund
distinction. I wouldn’t recommend long
bonds, either, given the historically low
interest-rate environment we’re in and
the potential for short-term losses if and
when interest rates begin rising.
I’d say Vanguard’s Select Fund bond
recommendations are acceptable. I pre-
fer the investment-grade funds to Total
Bond Market, which is weighted heavi-
ly with very interest-sensitive Treasurys.
What’s strange is that you kind of get a
smattering of maturities and durations
in these bond fund choices, with Short-
Term Tax-Exempt the shortest (where’s
Ultra-Short-Term Bond as the taxable
equivalent?) and Intermediate-Term
Investment-Grade at the long end of the
recommended spectrum.
Do Vanguard’s directors own these
funds? A few of them do, here and
there, as do some of the funds’ portfolio
managers. But tax-exempt bond funds
are more to their liking. Vanguard vet-
eran Pam Tynan keeps over $1 million
in her Short-Term Tax-Exempt charge.
So, that’s the story on Vanguard’s
Select Fund choices. Would I buy any
of them? Yes, one or two, as I’ve
noted. But, for the most part, Vanguard
has chosen a pretty pedestrian group
of funds for its “recommended list.”
Consider me unimpressed. n
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