(PUB) Investing 2015

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14 • Fund Family Shareholder Association
wouldn’t rush to sell if you already own
this, but if I were looking for a muni fund
today, I’d resist the yield temptation and
keep my portfolio’s duration a bit shorter.
High-YieldTax-Exempt
Hold.This is not a “junk bond” fund—
less than 15% of its portfolio is in below-
investment grade bonds. In that light, the
fund isn’t really comparable to High-
Yield Corporate, where more than 90%
of the portfolio is “junk.” This is still a
high-yielding fund, though. It’s just more
on par with Long-Term Investment-
Grade. The difference between this fund
and its tax-exempt siblings is that High-
Yield Tax-Exempt holds about 70% of
its portfolio in bonds rated A or bet-
ter, while a fund like Long-Term Tax-
Exempt, for instance, has more than 90%
of its portfolio there. You’ll pick up more
income with High-Yield Tax-Exempt,
but don’t forget that its higher yield sig-
nals higher risk. The high-yield fund’s
worst 12-month stretch in the past decade
was a decline of 10.5%, or roughly
double Long-Term Tax-Exempt’s worst
12-month loss of 5.8%.
If you really like that tax-free cash
and can stomach the volatility, this is the
fund for you. But please don’t overdo
it. A duration of 6.3 years (comparable
to Long-Term Tax-Exempt’s) and the
allocation to lower-rated bonds give the
fund a double dose of risk.
StateTax-Exempts
Sell/Buy. There’s only one state-
specific tax-exempt fund I recommend
for purchase at Vanguard, and that’s
California Intermediate-Term. Similar
to Intermediate-Term Tax-Exempt, this
fund invests in a sweet spot of the bond
market that has historically provided a
nice balance between risk and return.
If you already own the long-term
funds (or think you’d like to because of
the tax advantages in your state), but are
uncomfortable with anything but small,
incremental losses, one solution could
be to blend your holdings with Limited-
Term Tax-Exempt or even Short-Term
Tax-Exempt to moderate how sensitive
your overall portfolio is to changes in
interest rates. This is called a barbell
approach, and though you won’t avoid
state taxes on all of your income since
the national fund won’t give you full
state-tax-free interest, you will have
greater downside protection.
A 50-50 mix may be a good start-
ing place, but only you can know how
much downside risk you are willing to
withstand. n
500 Index $0.911 @ $180.57
Admiral T-M Balanced $0.140 @ $26.24
Admiral T-M Capital Appreciation $1.239 @ $99.20
Admiral T-M SmallCap $0.370 @ $43.95
Balanced Index $0.142 @ $28.84
Consumer Discretionary ETF $1.147 @ $115.40
Consumer Staples ETF $2.396 @ $120.23
Convertible Securities $0.039 @ $12.75
Developed Markets ETF $0.156 @ $35.69
Developed Markets Index $0.036 @ $8.77
Dividend Appreciation ETF $0.443 @ $72.46
Dividend Appreciation Index $0.170 @ $29.58
Emerging Markets Stock ETF $0.450 @ $32.69
Emerging Markets Stock Index $0.275 @ $20.86
Energy ETF $1.955 @ $83.01
Equity Income $0.217 @ $28.86
Europe ETF $0.225 @ $49.07
European Index $0.111 @ $26.07
Extended Market ETF $0.693 @ $80.37
Extended Market Index $0.460 @ $64.24
Financials ETF $0.287 @ $46.65
Global ex-U.S. Real Estate ETF $0.246 @ $50.81
Global ex-U.S. Real Estate Index $0.087 @ $20.11
Growth ETF $0.347 @ $102.91
Growth Index $0.159 @ $53.31
Health Care ETF $1.143 @ $118.77
High Dividend Yield ETF $0.528 @ $61.39
High Dividend Yield Index $0.205 @ $24.80
Industrials ETF $1.415 @ $93.28
Information Technology ETF $0.985 @ $98.34
LargeCap ETF $0.448 @ $88.70
LargeCap Index $0.171 @ $35.84
Materials ETF $1.568 @ $85.23
MegaCap ETF $0.371 @ $66.43
MegaCap Growth ETF $0.300 @ $79.79
MegaCap Value ETF $0.388 @ $55.73
MidCap ETF $1.130 @ $114.15
MidCap Growth ETF $0.438 @ $95.76
MidCap Growth Index $0.135 @ $39.43
MidCap Index $0.273 @ $32.52
MidCap Value ETF $1.193 @ $81.71
MidCap Value Index $0.436 @ $33.17
Pacific ETF $0.193 @ $54.07
Pacific Index $0.032 @ $10.17
REIT ETF $0.752 @ $74.53
REIT Index $0.241 @ $24.98
Russell 1000 ETF $0.441 @ $90.14
Russell 1000 Growth ETF $0.355 @ $98.15
Russell 1000 Value ETF $0.525 @ $82.63
Russell 2000 ETF $0.630 @ $91.25
Russell 2000 Growth ETF $0.473 @ $103.26
Russell 2000 Value ETF $1.037 @ $80.25
Russell 3000 ETF $0.392 @ $90.35
S&P 500 ETF $0.953 @ $178.02
S&P 500 Growth ETF $0.374 @ $98.97
S&P 500 Value ETF $0.498 @ $81.69
S&P MidCap 400 ETF $0.914 @ $93.82
S&P SmallCap 600 Growth ETF $0.704 @ $106.73
S&P SmallCap 600 Value ETF $0.847 @ $92.19
SmallCap ETF $0.959 @ $110.01
SmallCap Growth ETF $0.698 @ $120.88
SmallCap Growth Index $0.162 @ $34.38
SmallCap Index $0.406 @ $53.03
SmallCap Value ETF $1.143 @ $98.13
SmallCap Value Index $0.251 @ $23.58
Social Index $0.135 @ $12.66
STAR Cons. Gro. $0.090 @ $17.84
STAR Income $0.073 @ $14.62
Target Retirement Income $0.048 @ $12.59
Telecom Services ETF $2.341 @ $78.35
Total International Stock ETF $0.224 @ $44.20
Total International Stock Index $0.070 @ $14.11
Total Stock Market ETF $0.508 @ $99.61
Total Stock Market Index $0.233 @ $48.55
Total World Stock ETF $0.279 @ $55.61
Total World Stock Index $0.106 @ $22.61
Utilities ETF $0.875 @ $91.91
Value ETF $0.525 @ $77.34
Value Index $0.193 @ $30.32
Wellesley Income $0.188 @ $24.71
Wellington $0.243 @ $37.31
World ex-U.S. ETF $0.228 @ $42.65
World ex-U.S. Index $0.084 @ $16.70
World ex-U.S. SmallCap ETF $0.454 @ $90.68
World ex-U.S. SmallCap Index $0.162 @ $34.43
Special Distributions
BOWING TO INVESTOR DEMANDS
for greater income, and finding it in
non-U.S. stocks, Vanguard filed plans
with the SEC to launch two new funds,
International Dividend Appreciation
Index and International High
Dividend Yield Index in both open-
end and ETF formats. The funds are
expected to launch on December 7.
Expense ratios will start at a very low
level, with Investor shares charging 0.35%
and 0.40%, respectively, andAdmiral and
ETF shares charging 0.25% and 0.30%.
International Dividend Appreciation
Index will track a higher-quality variant
DIVIDENDS
Vanguard Looks Overseas for Income