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The Independent Adviser for Vanguard Investors

January 2016

7

FOR CUSTOMER SERVICE, PLEASE CALL

800-211-7641

investing to brilliant managers like Don

Kilbride at

Dividend Growth

, who,

despite a large overweight to the energy

sector, was able to generate a total

return of 2.7% in 2015, outpacing the

market and his index fund competitor,

Dividend Appreciation Index

, which

lost 2.0%. For that matter, the team

at PRIMECAP Management has done

well with long-term bets on the oil sec-

tor over the years.

You’re also going to be hearing

again, Vanguard files with the SEC for exemptive relief to offer ETF shares

of its actively managed funds…The Supreme Court legalizes same-sex

marriage across the country and again upholds provisions in Obamacare…

TOP FUND:

S&P SmallCap 600 Growth ETF

, 1.5%. WORST:

Precious

Metals & Mining

, -8.7%.

JULY:

Greece votes overwhelmingly against IMF proposals and

austerity, pushing the country one step closer to leaving the euro…

The NYSE halts trading for nearly four hours due to a computer glitch…

China’s government, in an effort to stem panic selling, bans major stock-

holders from selling shares for six months…Greece receives its third

bailout in five years, though the terms are even more stringent than

the ones it voted against…Jobless claims hit their lowest level since

1973…Chinese stocks decline 8.5% in a single day, the biggest daily

decline since 2007…TOP FUND:

Extended Duration Treasury ETF

,

7.0%. WORST:

Precious Metals & Mining

, -16.2%.

AUGUST:

A Puerto Rican agency defaults on bonds for the first

time, paying just $628,000 on $58 million that was due…IMF delays

giving the Chinese yuan reserve currency status for at least a year, silenc-

ing shrill warnings of a looming dollar collapse…After multiple delays,

Vanguard finally launches

Tax-Exempt Bond Index

…China devalues

its currency, the yuan, by 4% or so versus the dollar, sending ripples

across global markets…A Vanguard insider calls out the mutual fund

giant in a whistleblower tip for lax cybersecurity practices…Vanguard

launches

Alternative Strategies

fund, but unless you are an institu-

tional client of Vanguard, the only way to access the new fund will be

through

Managed Payout

…On Aug. 24, the Dow opens a whopping

1,000 points below its prior close, but recoups half those loses by the

end of the day. The S&P 500 index falls into correction territory (down

10% or more from the prior high) for the first time in about four years…

Second-quarter GDP’s growth rate is revised up to 3.7% from 2.3%…

Federal Money Market

joins

Prime Money Market

in yielding more

than 0.01%…TOP FUND:

Ohio Long-Term Tax-Exempt

, 0.5%. WORST:

Emerging Markets Select Stock

, -9.5%.

SEPTEMBER:

Oil falls below $40 a barrel for the first time

since 2009…Vanguard changes its frequent trading policy to 30 days

from 60 days, making it easier for shareholders to book tax losses…

In a much-hyped meeting, the Fed leaves interest rates unchanged…

Presidential hopeful Hillary Clinton tweets about a plan to regulate drug

pricing, sparking a sell-off in biotech stocks…Vanguard files with the

SEC to launch two new foreign index funds,

International Dividend

Appreciation Index

and

International High Dividend Yield

Index

…A prominent tax attorney says Vanguard could be liable for

$34.6 billion in back taxes and penalties if a whistleblower’s accusations

prove valid…Corporate raider Carl Icahn releases a video warning of an

approaching crisis, but provides little in the way of solutions…At the

eleventh hour, Congress passes a stopgap spending bill to keep the gov-

ernment open until December 11…TOP FUND:

Market Neutral

, 5.0%.

WORST:

Materials ETF

, -7.8%.

OCTOBER:

Vanguard announces Jim Barrow will retire from his

duties at

Windsor II

and

Diversified Value Annuity

at the end of the

year…

European Index

and

Pacific Index

transition to the new index-

es that were announced in June, adding small-cap stocks to their port-

folios…China abandons its one-child policy in the face of demographic

imperatives…In a first, the U.S. Treasury sells $21 billion of 3-month

bills at a 0.0% yield to overwhelming demand…Money market yields

continue rising slightly, with

Prime Money Market

up to 0.08%…The

Fed gives its clearest signal yet that a rate hike is coming in December…

Vanguard puts the

Health Care

team on a performance incentive plan,

the first ever for the fund’s managers…TOP FUND:

Materials ETF

,

12.9%. WORST:

Intermediate-Term Government Bond ETF

, -0.6%.

NOVEMBER:

Emerging Markets Stock Index

begins its transi-

tion to the all-inclusive FTSE Emerging Markets All Cap China A Inclusion

index…Jack Bogle tells the

Philadelphia Inquirer

that his market predic-

tions in the press are simply “casual” comments and that only his aca-

demic papers’ predictions should be considered serious…Chinese con-

sumers spend over $14 billion through Alibaba (the e-commerce giant) on

“Singles Day”…Tragedy hits Paris on Friday, Nov. 13, as terrorists strike

multiple targets in a coordinated attack, killing more than 120 people and

wounding hundreds more. ISIS claims responsibility for the massacres…

The IMF approves letting the Chinese yuan join the dollar, yen, euro

and pound as a reserve currency. The change will take effect in 2016…

Marriott buys Starwood in a $12 billion deal to create the largest hotelier

in the world, and Pfizer, in an inversion that will make it an Irish company,

inks a $160 billion merger deal with Allergan…Turkey downs a Russian

fighter jet near the Syrian border…

Energy

’s Karl Bandtel and

Long-

Term Investment-Grade

’s Lucius Hill both announce they will retire in

June 2016……TOP FUND:

Russell 2000 Growth ETF

, 3.7%. WORST:

Precious Metals & Mining

, -9.6%.

DECEMBER:

Vanguard delays the launch of two new foreign

stock index funds,

International Dividend Appreciation Index

and

International High Dividend Yield Index

, until 2016…Less than a week

after a shooting in Colorado, two shooters kill 14 people in San Bernardino,

California…Two new active funds,

Core Bond

and

Emerging Markets

Bond

, are proposed for 2016 release, though the EM fund may be kept

from the public for a bit…The Fed ends its ZIRP (zero interest rate policy)

with a 0.25% increase in the fed funds rate, seven years to the day after

it last cut rates…Donald Trump and Ted Cruz lead the GOP field as we

head into an embattled primary season…Investors suffer glitches as they

combine brokerage and fund accounts at Vanguard’s request…TOP FUND:

Consumer Staples ETF

, 2.2%. WORST:

Energy ETF

, -11.1%.

more and more about gold, since its

proponents believe not only that the

shiny metal protects against inflation

(it doesn’t) and is a store of value (it

>

SEE

OUTLOOK

PAGE 12