(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 U.S. stocks may be leading foreign stocks again this year, but don’t give up on investing
globally. International Growth remains a great way to own overseas companies.
(See page 1)
4 Tech stocks can heat up your portfolio when temperatures drop. But too much heat can
burn, so look to a PRIMECAP-run fund if you want to add some tech. (See page 4)
4 Short-Term Inflation-Protected Securities Index and Global ex-U.S. Real Estate
celebrated anniversaries, but don’t rush to buy either fund. (See pages 6 and 7)
thirds of the portfolio’s assets are in
its ETF shares.
Historically, risk was much greater
here than at Global Equity. During
the 2000–2002 bear market, Global
Equity’s maximum loss reached 23.3%.
The FTSE All-World index dropped
almost twice as much—a stunning
44.7% decline. However, during the
2008–2009 tumult, the tables were
turned—another reason to always keep
one skeptical eye open.
World ex-U.S. Index
Sell. Looking for a way to put up a
competitive foreign equity exchange-
traded fund, Vanguard hit on the idea
of starting this fund to track the FTSE
All-World ex-U.S. index in 2007. At
the time of its launch, an allocation to
Canada distinguished this fund from
Total International Stock. Now, how-
ever, the two funds have very similar
country and region allocations, not to
mention top 10 holdings.
With “only” 2,500 or so holdings,
this fund has a more compact portfolio
compared to Total International Stock’s
6,000-plus stocks. However, the two
funds have performed almost identi-
cally since the latter’s 2010 overhaul.
As mentioned, World ex-U.S. Index is
the more expensive option of the two:
Operating expenses run 0.29% versus
0.22%.
As I predicted, the fund’s cheaper
ETF shares (VEU) have garnered a
greater share of the assets than the
Investor and Institutional shares com-
bined. If you want it, use the ETF.
World ex-U.S. SmallCap Index
Hold. We remarked earlier that this
fund has at times provided some strong
competition for International Explorer,
which hadVanguard’s foreign small-cap
arena to itself for years. Tracking the
FTSE Global Small-Cap ex-U.S. index,
World ex-U.S. SmallCap Index holds
more than 3,400 stocks, with nearly
half its assets in companies in Canada,
the U.K., Japan and Taiwan. As is true
in the U.S., smaller companies can be
faster growers, and hence are a good
component in a growth-oriented port-
folio. When International Explorer is in
a relative performance funk, this fund
or its ETF shares (VSS) could be just
the ticket to finding high growth rates
beyond our shores. That said, I’ll repeat
my preference for active management,
both here and overseas. n
>
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