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Fund Family Shareholder Association
www.adviseronline.comDaniel P. Wiener
is America’s leading expert on
the Vanguard family of funds. He is founder of
the Fund Family Shareholder Association and
chairman and chief executive officer of Adviser
Investments, LLC, a Newton, Massachusetts,
investment advisory firm (800-492-6868). As
editor of
The Independent Adviser for Vanguard Investors
, he is
a five-time recipient of the Newsletter Publishers Foundation’s
Editorial Excellence Award. He also edits the annual
Independent Guide to the Vanguard Funds.
Mr. Wiener is often
quoted in the nation’s leading financial publications.
Jeffrey D. DeMaso,
Editor/Director of
Research, works directly with Dan Wiener
researching and writing the multiple-award
winning
Independent Adviser for Vanguard
Investors
newsletter. He also leads the analyst
team for Adviser Investments, LLC. Jeff gradu-
ated
magna cum laude
from Tufts University with a B.A. in
economics, holds the Chartered Financial Analyst designation
and is a member of the CFA Institute and the Boston Security
Analysts Society.
DO-IT-NOW ACTION RECOMMENDATIONS
4
Our 2016
Hot Hands
fund,
International Explorer
, has been on a roll. If you are follow-
ing the strategy, buy it. Jeff and I are weighing our options but are sticking with longtime
holding
International Growth
for now. (See page 1)
4
I applaud Vanguard for trimming the manager ranks at
Explorer
and
Morgan Growth
, but
there are still too many chefs stirring those pots for my money. (See page 7)
4
If you rebalance, follow your strategy to the letter. Despite what Vanguard and the press
may have you believe, rebalancing isn’t a requirement for investment success. (See page 12)
The Ultimate
Fund Guide
WITHOUT TURNING ON A COMPUTER,
without even looking up a telephone number,
you can have at your fingertips all the data
on your favorite Vanguard funds—with the
new FFSA
2016 Independent Guide to the
Vanguard Funds
.
This year, we have more data than ever,
including our proprietary risk and return
statistics like rolling returns and Maximum
Cumulative Loss (MCL), plus our take on
new funds Vanguard plans to launch, such
as
Core Bond, Emerging Markets Bond,
International Dividend Appreciation
Index
and
International High Dividend
Yield Index
.
Even with our huge computer files and access
to fund managers, my co-editor Jeff DeMaso
and I still find ourselves thumbing through the
annual guide to find that quick MCL statistic,
fund correlation, or even a total return figure
for 2006.
My
2016 Guide
is a great resource for
me, and for you. Call Customer Service at
800/211-7641 for all the details on how to
sign up for the guide.
outperforming month after month,
you’re probably not going to want to sell
it to invest the proceeds in a fund that’s
been losing you money. But the stan-
dard theory of rebalancing requires that
you do exactly that, and not just once,
but over and over and over. As former
Vanguard Chairman Jack Brennan once
said, “If you are going to rebalance, you
have to be absolutely clinical, or you are
better off not doing it.” Amen to that.
Of course you could take the more
laid-back route and rarely rebalance—
if at all—so long as you have a toler-
ance for the increased volatility that is
part of an un-rebalanced portfolio. And
when you figure the tax bill on fre-
quent trades, your freewheeling strat-
egy could come out substantially ahead.
As the data shows, going with the flow
isn’t that bad of an idea.
CheckingYourTarget
Several more things to consider: If
you do choose to rebalance on a set
schedule, is your target allocation still
appropriate—do you still have the same
investment goals as when you first
started using a rebalancing approach?
Just because you picked a certain allo-
cation at one point doesn’t mean that it
suits your purposes now.
Are you prepared for the headaches
and tax implications of making multiple
trades per year? While Vanguard allows
you to make trades online, you still open
yourself up to having to review those
trades, track all of the changes to make
sure there weren’t any errors (on your
part or Vanguard’s) and fill out extra
lines on your tax return for every capital
gain realized. This seems like a lot of
extra hassle for a modest reduction in
risk and a likely reduction in total return.
So is rebalancing necessary? Even
though the media and Vanguard may
have you think so, when you look at the
evidence, the benefit is all about risk,
and there is little benefit when it comes
to the portfolio’s returns, particularly
after factoring costs and taxes.
My recommendation would be to
make strategic rather than regular or
systematic trades over the course of
several years, as Dan and I try to do in
the
Model Portfolios
.
I have to quote JackBogle once again.
As he has concluded, “Rebalancing is a
personal choice, not a choice that statis-
tics can validate.”
Eloquently put, something Dan’s
been saying for a very long time, and
something that Vanguard itself should
take to heart.
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