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A PUBLICATION OF FUND FAMILY SHAREHOLDER ASSOCIATION • VOL. 26, NO. 2

Faulty Barometer

AN OLD MARKET CHESTNUT

says that “as goes January, so goes the rest of the year.”

This so-called “January Barometer” gets trotted out every time the year starts with a

decline (you almost never read about it when January is in an uptrend). But just because

500 Index

fell 5.0%, its worst start to a year since 2009, you shouldn’t pay it much heed.

If there’s one stat that debunks the January Barometer in my mind, it’s this: Since

500 Index’s 1976 inception, the January Barometer correctly predicted when the market

would finish the year with a gain or a loss 72% of the time. That’s better than a coin flip!

But if you “naively” expected stocks to notch gains each year (based on the assumption

that stocks go up over time), you would have been correct 82% of the time.

This isn’t to say I’m blasé about the start of the year. I get it. Investing in stocks today

doesn’t feel great. So let’s take a step back and take stock of where we are. After a ho-

hum year last year, stocks of all shapes and sizes have stumbled out of the gate. The S&P

500 index is 8.9% below its May 2015 high. Small-cap stocks have fared worse, with the

Russell 2000 index falling 8.8% in January and now technically in bear territory, down

20.1% from its June 2015 high. The Euro Stoxx 600 index, akin to our S&P 500 index,

fell 6.4% in January, and is less than 3% from finding itself in a bear market. Emerging

market stocks have seen prices fall even further.

Those are the indexes, but what about the managers you and I invest with? Well,

Don Kilbride at

Dividend Growth

is holding up relatively well, as we’d expect, down

only 2.9% in January. Our buffer positions in

Short-Term Investment-Grade

and

Intermediate-Term Investment-Grade

continue to fill that role well, gaining 0.5% and

The Independent Adviser for Vanguard Investors

and FFSA are completely independent of The Vanguard Group, Inc.

MOMENTUM

Eking Out Another Win

IN AYEAR WHEN MOST STOCK FUNDS’

returns hovered around zero, inking a win

in any investment competition was tough.

PRIMECAP Core

, our 2015

Hot Hands

fund, just managed to outperform

Total Stock Market Index

with a 0.9% gain, edg-

ing the index fund’s 0.3% rise.

PRIMECAP Odyssey Stock

, the near-clone of the closed

PRIMECAP Core and the alternative suggested one year ago, gained 1.7%.

But what may surprise you the most (it certainly surprised me) is the fact that while

it came down to the wire, the 2016

Hot Hands

fund,

International Explorer

, is the first

foreign stock fund to make it into the

Hot Hands

derby since capturing that crown four

years running, from 2003 through 2006. In every one of those years, the fund sailed past

the domestic index fund benchmark. Are we setting up for a repeat? Read on.

DOW JONES INDUSTRIALS

January Close:

16466.30

STANDARD & POOR’S 500

January Close:

1940.24

4400

4650

4900

5150

5400

JDN OSA J JMAM F

NASDAQ COMPOSITE

January Close:

4613.95

0.00%

0.08%

0.16%

0.24%

0.32%

JDN OSA J JMAM F

3-MO.TREASURY BILLYIELD

January Close:

0.30%

1.6%

1.8%

2.0%

2.2%

2.4%

2.6%

JDN OSA J JMAM F

10-YR.TREASURY NOTE YIELD

January Close:

1.93%

16000

16600

17200

17800

18400

JDN OSA J JMAM F

1850

1900

1950

2000

2050

2100

2150

JDN OSA J JMAM F

AVERAGEVANGUARD INVESTOR*

January:

-3.6%

YTD:

-3.6%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

JDNOSAJ JMAMF

*See the footnotes on page 2.

Eking Out Another Win..................................................... 1

Model Portfolios................................................................ 2

Vanguard Trims Its Ranks.................................................. 7

Performance Review.................................................... 8-11

To Re or Not to Re, That Is the Question........................ 12

Do-It-Now Action Recommendations............................. 16

F EBRUARY 2016

SEE

BAROMETER

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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

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SEE

MOMENTUM

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