(PUB) Investing 2015

The Independent Adviser for Vanguard Investors

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September 2015

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FOR CUSTOMER SERVICE, PLEASE CALL

800-211-7641

I USED TO BE

a competitive sailor, rac-

ing my one-man Laser in regattas up

and down the East coast from Miami

to Maine as well as competing on the

college circuit for a couple of years. In

sailing, there’s a term that I’ve never

heard in any other sport: When some-

one gets so far ahead of the rest of the

fleet of competitors, and there’s almost

no chance of catching them, we call

that “pulling a horizon job.” I think the

term speaks for itself.

Twenty years ago, on Aug. 14, 1995,

Vanguard launched the

Horizon

funds

with the expectation that they, too, would

pull horizon jobs on the mutual fund

competition. Vanguard was so excited

by this quartet of new options that it took

out full-page advertisements in papers

The New York Times

proclaim-

ing “Something New And Different

From Vanguard.” The funds—Horizon

Global Equity, Horizon Global Asset

Allocation, Horizon Capital Opportunity

and Horizon Aggressive Growth—had

been “Developed Exclusively For Long-

Term Investors” and would be “Actively

Managed To PursueMaximumReturns.”

Then-Chairman Jack Bogle said the

funds were being introduced in direct

response to the strong performance of

Fidelity’s active funds.

Since you probably aren’t familiar

with the

Horizon

name, you may be

wondering what happened to some

of these funds. Well, Global Asset

Allocation never gained traction with

investors, and performance was punk,

so it never got close to pulling a horizon

job. It was closed down shy of its sixth

birthday. Aggressive Growth still exists,

but it’s now called

Strategic Equity

since it wasn’t really all that aggressive.

The other two funds dropped the word

“Horizon” from their names and are

now simply called

Global Equity

and

Capital Opportunity

However, there’ve been changes

among these last two as well. Global

Equity has become a multimanaged

fund, toning down its performance

somewhat, and Capital Opportunity’s

original manager, Frank Husic, was so

bad he was fired after just a couple of

years and replaced with the venerable

PRIMECAP Management team.

In the chart on page 16, I’ve graphed

the performance of each of the surviv-

ing funds against

Total Stock Market

Index

. Now, I know that Global Equity

has a 40% allocation to foreign shares

ANNIVERSARIES

Horizon Job

and Strategic Equity is a more mid-

cap oriented fund. In fact, Capital

Opportunity used to be more small- and

mid-cap oriented as well. But I wanted

to use one consistent bogey to make

the point that two of the funds (active

funds, mind you) have substantially

outperformed the broad U.S. market

index fund. Global Equity has actually

about matched the U.S. market, and

DISTRIBUTIONS TO COME

More Funds Go Quarterly

THE LIST OF FUNDS PAYING INCOME DISTRIBUTIONS quarterly just got a lot larger. As

announced many months ago, two dozen funds, including

Consumer Discretionary Index

and its sector ilk, will now start paying every three months. So will most of Vanguard’s mid-cap

and small-cap index funds. (This goes for all share classes of each fund, including ETFs.)

With so many funds distributing, you’ll need to watch the calendar and listen to our

Hotlines

as Vanguard begins releasing actual distribution dates.

Remember that for tax reasons, you don’t want to “buy a distribution,” so if you’re planning

an investment in a taxable account, please hold off until after the “record date,” which is the

date ownership is determined for distribution purposes. (If you’re investing in a tax-deferred

account, you don’t need to worry about this.)

The funds and ETFs that are scheduled to distribute are listed below. Remember that all

share classes distribute, so whether you own Investor, Admiral or ETF shares, you’ll still

get a distribution. Note that there is a strong likelihood

Short-Term Inflation-Protected

Securities Index

will not make a quarterly distribution. It hasn’t done so since inception, only

eking out tiny year-end payouts, and with inflation subdued, short-term Treasury yields in the

basement, and the fund’s yield hovering around zero, there’s probably not much for the fund to

actually pass on to shareholders. In fact, it could be that

Inflation-Protected Securities

also

misses a payment this quarter. We’ll see.

THE LIST:

500 Index, Balanced Index, Consumer Discretionary Index, Consumer Staples Index,

Convertible Securities, Developed Markets Index, Dividend Appreciation Index, Emerging

Markets Stock Index, Energy Index, Equity Income, European Stock Index, Extended Duration

ETF, Extended Market Index, Financials Index, Global ex-U.S. Real Estate Index, Growth Index,

Health Care Index, High Dividend Yield Index, Industrials Index, Inflation-Protected Securities,

Information Technology Index, Large-Cap Index,

LifeStrategy

Conservative Growth,

LifeStrategy

Income, Materials Index, MegaCap ETF, MegaCap Growth ETF, MegaCap Value ETF, MidCap

Growth Index, MidCap Index, MidCap Value Index, Pacific Stock Index, REIT Index, Russell

1000 ETF, Russell 1000 Growth ETF, Russell 1000 Value ETF, Russell 2000 ETF, Russell 2000

Growth ETF, Russell 2000 Value ETF, Russell 3000 ETF, S&P 500 Growth ETF, S&P 500 Value

ETF, S&P Mid-Cap 400 ETF, S&P Small-Cap 600 Growth ETF, S&P Small-Cap 600 Value ETF,

Short-Term Inflation-Prot. Sec. Index, SmallCap Growth Index, SmallCap Index, SmallCap Value

Index, Social Index, Target Retirement Income, Tax-Managed Balanced, Tax-Managed Capital

Appreciation, Tax-Managed SmallCap, Telecommunication Services Index, Total International

Stock Index, Total Stock Market Index, Total World Stock Index, Utilities Index, Value Index,

Wellesley Income, Wellington, World ex-U.S. Index, World ex-U.S. SmallCap Index.