A PUBLICATION OF FUND FAMILY SHAREHOLDER ASSOCIATION • VOL. 24, NO. 5
End of Days?
WHETHERYOU BELIEVE
the versions of the end of days that essentially see the second
coming of all manner of gods or messiahs, or the other versions, which posit that decay,
redemption and rebirth are what’s in store, the seemingly endless fascination with an
end-of-days scenario for the bull market just can’t seem to gain traction—though it’s not
for lack of trying. Every day stocks fall, investors are greeted with headlines warning that
this is
the
correction. The false prophets of Wall Street foresee a terrible time ahead, with
stocks falling at least 10%, inflation (or deflation—take your pick) coming down upon
the consumer from on high, and a “rigged” market bringing famine and destruction upon
all who attempt to profit from it.
Enough already!
The fact is that a 10% market decline is more common than you think. If at any time
over the past 30 years a Martian had landed on earth and compared the current level of
the S&P 500 index to its most recent high, there is a one-in-three chance that the alien
would have found the market 10% or more below that high. And on just under half
(48.4%, to be precise) of the more than 8,000 trading days over the past three decades,
the S&P 500 index was 5% or more below its most recent high.
So let me say it again: Market declines are a part of the fabric of our daily investment lives.
And, as if the handwringing over a market stepback weren’t enough, investors were
handed yet another reason to avoid stocks when Michael Lewis, author of
Moneyball
and
The Big Short
, called the stock market “rigged” against investors in a
60 Minutes
interview.
Lewis was on the program to promote his new book,
Flash Boys
, which tells a fast-paced
tale of high-frequency trading (HFT or speed trading) and its impact on today’s markets.
The Independent Adviser for Vanguard Investors and FFSA are completely independent of The Vanguard Group, Inc.
TAX EFFICIENCY
Exceedingly Efficient
WITH THE APRIL 15 TAX DEADLINE
now behind us, I can fully appreciate the desire to
minimize one’s tax bill. However, the goal of investing isn’t to avoid taxes, but to maxi-
mize wealth after paying taxes. Keeping an eye on taxes certainly should be a part of
your investment strategy, but it’s not the whole story.
For the past three and five years, most of Vanguard’s funds have been quite good at
shielding most of their shareholders’ returns from the tax man. This was largely thanks
to big tax losses recorded during the bear market. However, those tax losses are now
ancient history, and taxable gains are building in Vanguard’s funds.
In a nutshell,
U.S. Growth
was the single most tax-efficient fund over the past three
years, as the portfolio managers took advantage of millions in realized losses. In fact,
DOW JONES INDUSTRIALS
April Close:
16580.84
STANDARD & POOR’S 500
April Close:
1883.95
3000
3300
3600
3900
4200
4500
AM F JD NOS AJ JM
NASDAQ COMPOSITE
April Close:
4114.56
0.00%
0.02%
0.04%
0.06%
0.08%
AM F JD NOS AJ JM
3-MO.TREASURY BILLYIELD
April Close:
0.02%
2.0%
2.3%
2.6%
2.9%
3.2%
AM F JDNOS AJ JM
10-YR.TREASURY NOTE YIELD
April Close:
2.65%
14000
14900
15800
16700
17600
AM F JD NOS AJ JM
1500
1600
1700
1800
1900
2000
AM F JD NOS AJ JM
AVERAGEVANGUARD INVESTOR*
April:
0.5%
YTD:
2.5%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
AMF JDNOSAJ JM
*See the footnotes on page 2.
Model Portfolios................................................................ 2
Managing Tax-Managed Funds.......................................... 4
U.S. Growth Emerging?.................................................... 4
Fool’s Gold........................................................................ 5
Selected Value Bulks Up................................................... 6
Smooth Sailing?................................................................ 7
Performance Review.................................................... 8-11
Windsor II Slims Down................................................... 15
PIN
7638
MAY 2014
SEE
END
PAGE 3
>
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
EFFICIENCY
PAGE 12
