A PUBLICATION OF FUND FAMILY SHAREHOLDER ASSOCIATION • VOL. 24, NO. 9
Turbulent Times
THE WORLD’S A MESS.
Russia has now, with no uncertainty, invaded Ukraine; the long-
simmering issues in the Middle East are being fanned into a roaring fire by ISIS; the
Ebola virus is becoming a larger health issue in Africa than was originally thought; and
Europe seems on the verge of deflation if not outright recession.
We are not immune. From aerial tiffs with the Chinese to cyber attacks emanating
from who-knows-where, and the broader issue of our presumed role as the cop on the
global beat and how we respond to that, we can’t exactly erect barriers to insulate our-
selves from conflicts seemingly far from our shores.
So maybe it isn’t so surprising that new highs posted by U.S. stocks reflect a continu-
ously strengthening economy at home, while our bond market suggests that investors
here remain nervous (money keeps pouring into bond funds) and overseas investors
see us as both a safe haven and, yes, even an island of relative value. In Germany, for
instance, the yield on the 10-year bund has fallen below 0.90%, making our 10-year’s
2.34% yield look positively wunderbar.
Let the naysayers and bears keep growling. Last month, I told you that I thought all
the chatter about the stock market’s imminent demise, having fallen a few percentage
points from its mid-July peak, was a bunch of hooey. Well, the S&P 500 index hit multi-
ple new highs in August, while at the same time, more and more economic data confirms
that the U.S. economy is growing nicely, with corporate profits also moving higher.
Total
Stock Market
gained 4.2% for the month, while
Total International Stock
and
Total
Bond Market
both added 1.1%.
The Independent Adviser for Vanguard Investors and FFSA are completely independent of The Vanguard Group, Inc.
FUNDS FOCUS
> MONEY MARKET FUNDS
Zero Yield, But Still Valuable
INVESTORS HAVE TWO COMMON, YET OPPOSING SAYINGS
about cash: “Cash is
trash,” and “Cash is king.” Well, which one is it? Neither, actually. In my view, cash is a
cornerstone of any investment portfolio and a vital money management tool, but it is not
a long-term investment itself.
For most fund investors, the equivalent to cash is a money market fund. If all goes
according to plan, a money market fund’s price will sit at $1.00 as we earn a little bit
of income day in and day out without reading about the fund in the headlines. (Yawn.)
Unfortunately for investors, that yield has been hard to come by for some time now, and
money market funds have been making headlines.
Let’s start with the headlines. As I mentioned last month, the SEC recently changed
some rules when it comes to money market funds—though for you and me, the changes
DOW JONES INDUSTRIALS
August Close:
17098.45
STANDARD & POOR’S 500
August Close:
2003.37
3600
3900
4200
4500
4800
AJ JMAM F JD NOS
NASDAQ COMPOSITE
August Close:
4580.27
0.00%
0.02%
0.04%
0.06%
0.08%
AJ JMAM F JD NOS
3-MO.TREASURY BILLYIELD
August Close:
0.02%
2.0%
2.3%
2.6%
2.9%
3.2%
AJ J MAM F JDNOS
10-YR.TREASURY NOTE YIELD
August Close:
2.34%
14600
15200
15800
16400
17000
17600
AJ JMAM F JD NOS
1650
1750
1850
1950
2050
AJ JMAM F JD NOS
AVERAGEVANGUARD INVESTOR*
August:
2.6%
YTD:
7.4%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
AJ JMAMF JDNOS
*See the footnotes on page 2.
Model Portfolios................................................................ 2
Performance Review.................................................... 8-11
The Investment Tipping Point.......................................... 12
Ghost in the Machine. .................................................... 14
When One Fund Acts Like Another................................ 14
Vanguard Speak.............................................................. 15
Quarterly Payouts............................................................ 15
Dan’s Do-It-Now Action Recommendations.................... 16
PIN:
SEE PAGE 16
S EPT EMBER 2014
SEE
TURBULENT
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
ZERO
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