(PUB) Investing 2016

The Independent Adviser for Vanguard Investors

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March 2016

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FOR CUSTOMER SERVICE, PLEASE CALL

800-211-7641

sum that will continue to grow for many

years to come. It won’t pay for a nurs-

ing home just yet, but then again, he’s

got a few years before that becomes

an issue. And he’s learned the value of

early and long-term investing and com-

pounding. With a good job, he’s already

saving outside his IRA and is funding

a 401(k) at work. My daughter’s IRA,

smaller because she’s younger, is also

growing. (I matched her earnings too.)

And yes, after a job change, she’s got a

401(k) as well.

Okay. That’s my kids. What about

yours? Let’s go back and review my

thinking on the teenage Roth IRA,

so you won’t put this off. It’s impor-

tant and especially timely given that

the April 15 deadline for contributions

seems to sneak up quickly on those

who’ve procrastinated about making

their deposits.

The Roth IRA is an excellent retire-

ment savings vehicle for younger peo-

ple. Since their introduction in 1998,

Roth IRAs have been garnering respect

(and dollars) from knowledgeable

investors for the advantages they have

over traditional IRAs.

While a traditional IRA allows you

to deduct your contributions pre-tax,

it also locks your money in until you

are 59½ years old (unless you feel like

paying a 10% fee on withdrawals, plus

income taxes), and forces you to take

distributions upon reaching the age

of 70½, paying income taxes at your

future—and possibly higher—tax rate.

In contrast, when contributing to a

Roth IRA, you invest with after-tax dol-

lars now and can withdraw funds tax-

free after the age of 59½ or if you meet

other IRS qualifications (for instance,

if the distributions will be used for a

first-time home purchase—something

today’s kid might appreciate tomor-

row—or to help with a disability).

Once you do hit retirement, there is

DISTRIBUTIONS TO COME

Pay Close Attention This Year

IT’S THAT TIME OF YEAR AGAIN. While it seems like the December distribution period happened just a couple of weeks ago, time marches on, and

March marks 2016’s first round of quarterly distributions, as well as any supplemental distributions that Vanguard must pay out. Supplemental distribu-

tions are gains or income that were earned but not distributed in 2015 and must be paid out before the end of the first quarter to keep funds in compli-

ance with SEC regulations.

Health Care

and

Energy

are habitual supplemental distributors of both income and capital gains. Even

Precious Metals & Mining

paid out a

$0.148 income distribution in March 2015. While Health Care could be expected to pay out an additional gain this year, I’d be pretty surprised if either

of the two other funds did. In addition, given the state of the bond market, the inflation funds may not pay out any income, either. Last year, a number

of taxable income funds paid out extra capital gains. Vanguard should have the data for 2016 out by early March.

As a reminder, I encourage taxable investors to direct distributions to money market accounts instead of reinvesting immediately in the fund where

the distribution came from (something I practice with my own money). This allows you the flexibility to redeploy the money to underperforming funds

or to pay a tax bill without having to sell shares down the road.

Also, please pay close attention to how your distributions are handled if you have consolidated your brokerage and fund accounts. As you know,

Vanguard messed up a lot of shareholders’ distribution instructions when they did the consolidation. If you want your distributions in cash, make sure

that’s what happens. If you want them reinvested, again, keep your eye on what Vanguard’s doing. Catch any mistakes early and have them corrected

immediately.

The list of quarterly income payers is below:

Remember, the ETF shares of the funds listed above will also pay out distributions. Additionally, a few other ETFs are scheduled to pay out regular

quarterly income:

500 Index

Balanced Index

Consumer Discretionary Index

Consumer Staples Index

Convertible Securities

Developed Markets Index

Dividend Appreciation Index

Emerging Markets Stock Index

Energy Index

Equity Income

European Index

Extended Market Index

Financials Index

Global ex-U.S. Real Estate Index

Growth Index

Health Care Index

High Dividend Yield Index

Industrials Index

Inflation-Protected Securities

Information Technology Index

LargeCap Index

Materials Index

MidCap Growth Index

MidCap Index

MidCap Value Index

Pacific Index

REIT Index

Short-Term Inflation-Protected

Securities Index

SmallCap Growth Index

SmallCap Index

SmallCap Value Index

Social Index

STAR

LifeStrategy

Cons. Growth

STAR

LifeStrategy

Income

Target Retirement Income

Tax-Managed Balanced

Tax-Managed Capital Appreciation

Tax-Managed SmallCap

Telecommunication Services Index

Total International Stock Index

Total Stock Market Index

Total World Stock Index

Utilities Index

Value Index

Wellesley Income

Wellington

World ex-U.S. Index

World ex-U.S. SmallCap Index

Extended Duration Treasury ETF

MegaCap ETF

MegaCap Growth ETF

MegaCap Value ETF

Russell 1000 ETF

Russell 1000 Growth ETF

Russell 1000 Value ETF

Russell 2000 ETF

Russell 2000 Growth ETF

Russell 2000 Value ETF

Russell 3000 ETF

S&P 500 Growth ETF

S&P 500 Value ETF

S&P MidCap 400 ETF

S&P SmallCap 600 Growth ETF

S&P SmallCap 600 Value ETF