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A PUBLICATION OF FUND FAMILY SHAREHOLDER ASSOCIATION • VOL. 25, NO. 7
Kick Can, Stub Toe, Default
TRY AS THEY MIGHT,
the Greek government couldn’t kick the debt can any further down
the road as June closed, sparking volatility across the globe. Not that the Greeks were
alone. China’s stock bubble and Puerto Rico’s pending default also played into big market
moves. Meanwhile, here at home, the economy continues to show signs of expansion.
Having tried to bundle payments, defer payments, and finally call a vote on payments
(and whether to proceed down the path of austerity or not), Greece blinked before the
eurozone’s leaders and was forced to stop a euro drain by closing the banks and stock
market to keep whatever money was still in the system from disappearing. Greeks had
been yanking hundreds of millions of euros from the banking system on a daily basis.
For all the turmoil,
Total International Stock
dropped just 2.7% in June and is up
5.4% for the year.
Total Stock Market
was off 1.7% for the month but up 1.8% in the
first half. A flight to the safety of Treasurys couldn’t make up for all of the bond mar-
ket’s declines due to rising interest rates (the 10-year Treasury’s yield rose from 2.10% to
2.34% and its price fell 1.9% during the month), and
Total Bond Market
, off 1.0% this
past month, is also off a fractional 0.2% for the year.
Our portfolios have held up quite well, with year-to-date gains ranging from 1.5%
for the
Income Model Portfolio
to 3.9% for the
Growth Model Portfolio
.
Health Care
’s
13.8% gain has helped as has the 6.7% return from
International Growth
.
Why the relatively minor market response given all the media’s attention? Greece sim-
ply doesn’t pose the same systemic risk it did when its debt drama debuted four years
The Independent Adviser for Vanguard Investors
and FFSA are completely independent of The Vanguard Group, Inc.
BONDS 101
Bond ABCs
ONE CARDINAL RULE OF INVESTING
is never to invest in something you don’t under-
stand. Yet all most investors I talk to seem to be able to say about bonds with any con-
fidence is that they are safe. Millions of investors regularly buy bonds and bond funds
with very little knowledge of just how bonds (and the bond market) work.
Stocks are a little easier—most people “get” stocks. When you buy a stock, you own a
piece of a company, and as that stock’s price goes up and down, you make or lose money.
But bonds seem to leave people at a loss for words, and, on top of that, today many inves-
tors are questioning the one thing they thought they knew about bonds—that they’re safe.
I can’t say I blame bond investors for their confusion and unsettled feelings. The
media has been painting a picture of a bond market turned upside down. For years inves-
tors have been warned of the imminent death of the bond bull market. And the end of
DOW JONES INDUSTRIALS
June Close:
17619.51
STANDARD & POOR’S 500
June Close:
2063.11
4000
4300
4600
4900
5200
JMAM F JD NOS AJ
NASDAQ COMPOSITE
June Close:
4986.87
0.00%
0.01%
0.02%
0.03%
0.04%
JMAM F JD NOS AJ
3-MO.TREASURY BILLYIELD
June Close:
0.01%
1.6%
2.0%
2.4%
2.8%
3.2%
JMAM F JD NOS AJ
10-YR.TREASURY NOTE YIELD
June Close:
2.34%
16000
16600
17200
17800
18400
JMAM F JD NOS AJ
1800
1900
2000
2100
2200
JMAM F JD NOS AJ
AVERAGEVANGUARD INVESTOR*
June:
-1.6%
YTD:
1.6%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
JMAMF JDNOSAJ
*See the footnotes on page 2.
Model Portfolios................................................................ 2
Don’t Fear a Top................................................................ 7
Performance Review.................................................... 8-11
Marketing Coup for Vanguard, Meh for Investors........... 12
Targeting Cheaper Shares............................................... 14
Older and Messier.......................................................... 14
June Special Distributions. ............................................. 16
Dan’s Do-It-Now Action Recommendations.................... 16
JULY 2015
SEE
DEFAULT
PAGE 3
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S P E C I A L E X P A N D E D 1 6 - P A G E I S S U E
>
SEE
BONDS
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