(PUB) Investing 2016

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Fund Family Shareholder Association

www.adviseronline.com

Daniel 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

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)

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)

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

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.

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

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.