The Independent Adviser for Vanguard Investors
•
September 2014
•
3
FOR CUSTOMER SERVICE, PLEASE CALL
800-211-7641
What’s particularly interesting to me
is the broad rotation we’ve experienced
in the first eight months of this year.
During the first quarter, U.S. small
stocks were by far the best performers,
and now they are the laggards. Foreign
developed stock markets took the lead
for a while. And after an almost 10%
decline, emerging markets have come
roaring back and are now outperform-
ing by a wide margin, as the chart to the
right shows.
Don’t forget what the naysayers
were shouting about junk bonds, either.
High-Yield Corporate
, which dropped
1.2% in July (its first losing month in
11), came back with a 1.6% gain in
August as sentiment suddenly shifted
and Wall Street started buying again.
You and I didn’t panic, and we’ve
made good money in the sector. And
for all the claims that health care stocks
would begin to falter after their robust
performance early this year,
Health
Care
remains up 19.0% after generat-
ing a further 4.1% gain this past month.
I expect diversified portfolios such as
ours, with year-to-date gains of 7.8% to
8.4% and allocations to great managers
in the large-cap, mid-cap and health
sectors, among others, to continue to
provide a good ride through the global
turmoil, whether it’s geopolitical or
market-induced.
Going for Brokerage
Vanguard has taken a page from
my playbook and has a push on to get
investors to merge their individual fund
accounts under a brokerage account
umbrella (with separate accounts for
IRAs, joint accounts, and so on). You’ll
Daniel P. Wiener - Senior Editor
Jeffrey D. DeMaso - Editor/Research Director
Seth H. Kennedy - Assistant Editor
Amy Long - Vice President and Publisher
Billy Currano - Senior Managing Editor
David Clarfield - Assistant Managing Editor
Louisa Dorado - Marketing Director
Mary Taylor - Marketing Director
John Hall Design Group - Design and Production
Fund Family Shareholder Association
Member, Newsletter Publishers Association
Daniel P. Wiener - Chairman
James H. Lowell - President (
The Independent Adviser for Vanguard Investors (ISSN 1093-4200) is published monthly for members of the Fund Family Shareholder Association
by InvestorPlace Media, LLC, 9201 Corporate Blvd., Rockville MD 20850. A one-year membership is $229 (foreign, add $18).
POSTMASTER: Send address changes to The Independent Adviser for Vanguard Investors/Fund Family Shareholder Association, c/o InvestorPlace
Media, LLC, 700 Indian Springs Drive, Lancaster, PA 17601.
The FFSA is an independent organization dedicated to providing investors with intelligent and objective advice about the Vanguard family of mutual
funds and services. If you have questions regarding your membership, call 800/211-7641
). While the information provided
is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can the publication be considered liable for
the future investment performance of any securities or strategies discussed. The newsletter, hotline and associated publications provide information
of general interest and are not intended to provide individualized investment advice for any subscriber or specific portfolio. Subscribers are urged to
review the full disclaimer and securities holdings disclosure policy associated with this publication at
.
html or call
800-219-8592
to receive a copy via mail. Vanguard and The Vanguard Group are service marks of The Vanguard Group, Inc. FFSA and
InvestorPlace Media, LLC are not affiliated in any way with The Vanguard Group and receive no compensation from The Vanguard Group, Inc.
Copyright 2014 by Fund Family Shareholder Association. Reproduction in whole or in part is prohibited except by written permission of FFSA.
TURBULENT
FROM PAGE 1
>
have SIPC protection for your fund
assets up to $500,000 (which you didn’t
have with the regular fund account),
and it will make transacting business
speedier (they say). Plus, the year after
you make the switch, you’ll receive a
consolidated tax document for invest-
ments held at Vanguard.
But there are several devils in the
details. They aren’t deal-killers, but this
isn’t seamless either. For instance, if
you have given someone like a trustee
or investment adviser access to your
account, you’ll have to redo those
permissions on your new brokerage
accounts. The permissions don’t carry
over. Also, if you’ve been taking dis-
tributions from one fund and having
them deposited into another fund, that
service is going away. You will have to
make all of those trades manually.
With the new brokerage account,
you’ll receive a new money market
fund—either
Prime Money Market
or
Tax-Exempt Money Market
—
that will become your “settlement
account” even though you may already
be investing in a state tax-free money
fund,
Admiral Treasury Money
Market
or
Federal Money Market
.
Sell a fund or ETF, or receive interest
on a bond, and that money will go into
the new settlement account. Want to
write a check on it? You’ll need new
checks. Vanguard says that you can
still hold onto your old money fund
and designate it as an “alternative
redemption” fund, which means it’ll
be your backup if you write a check
and overdraw your new settlement
account. Thanks, but aside from the
confusion, that doesn’t really help the
investor who wants all her cash in the
Treasury fund, for instance, and not
something else.
Ultimately, having all yourVanguard-
held assets under a brokerage umbrella
makes sense to me. The problem is
the path from here to there is riddled
with potholes. Vanguard’s new broker-
age account pamphlet, which you can
find online, isn’t completely clear. You
won’t be required to make this switch
now, but eventually it sounds like all
Vanguard shareholders will be moving
to this brokerage model.
Finally, I wanted to let you know
that yes, my team and I do read all
of the emails and letters you write
to us at
AdviserOnline
, and yes, I do
want to respond to as many as I can.
Of course, as you may suspect, the
number of questions and comments
(including some very nice ones, thank
you) is quite large. One thing I am
learning from your questions is that
it’s important to keep returning to the
basics—with a Vanguard flavor. Jeff
and I will continue to do that in the
weeks and months ahead. Our story
on compounding, which begins on
page 12, is an effort in that direction.
Enjoy.
n
LeadershipHas Rotated in 2014
(Year-to-Date Returns Through August)
SmallCap Index
Total Stock Market
Emerging Markets Index
Total Int’l. Stock Index
12/13
1/14
2/14
3/14
4/14
5/14
6/14
7/14
8/14
-10%
-5%
0%
5%
10%
15%
