579 / 708
A PUBLICATION OF FUND FAMILY SHAREHOLDER ASSOCIATION • VOL. 26, NO. 4
Meme Change
THE COMMON “WISDOM” OF 2016
has been that the economy is headed for recession,
the bull market in stocks is ready for a tumble, oil will remain under $30 per barrel,
wages are stagnant, the dollar will stay strong and the Fed will be making multiple inter-
est-rate hikes before Christmas.
At least, those were the memes before mid-February. Since then, many pundits have
reversed course, as stocks have rebounded to within 3.5% of their all-time highs, oil has
pushed into the $40 range, gold has bounced, and our slow-growth, not no-growth econ-
omy has continued to move ahead.
One area of the market that hasn’t sprung back is health care. Not only are
Health
Care
and
Health Care ETF
off 8.8% and 6.9%, respectively, for the year, but
Capital
Opportunity
, with its heavy allocation to the sector, is down 3.2%. I smell opportunity.
Re-read last month’s issue for a deeper dive into the health care sector, and keep
in mind that we’ve seen this movie before. Just think back to the early worries about
Obamacare. From January 2009 through February 2011, Health Care rose 34.3%. Not
bad, you think. But
Total Stock Market
gained 59.5% over the same period. I can still
remember the questions about why I was such a fan—didn’t I know that Obamacare was
going to strip profits and ruin the industry? Think again. From February 2011 through
the end of 2015, Health Care gained 154.2%, more than double the 66.7% return from
Total Stock Market. Maybe this is another of those periods? Health Care’s been trailing
since August. Its relative performance could get worse before it gets better—but it will
get better. If you’ve got some spare cash, that’s where I’d invest it. Or take a more
The Independent Adviser for Vanguard Investors
and FFSA are completely independent of The Vanguard Group, Inc.
EXPENSES
When Costs Go Up, Not Down
YOU’VE PROBABLY NOTICED
that Vanguard has been working pretty hard of late to
promote the fact that the expense ratios on many of its funds have been going down.
Low costs are Vanguard’s calling card.
But what if I told you that a lot of Vanguard funds saw their expense ratios go up,
rather than down, over the past six months? Unfortunately, expense ratios, like perfor-
mance figures, can be manipulated, as they depend on the time periods you look at.
With the release of their December 2015 annual reports, fully 52 Vanguard funds
(counting separate Investor, Admiral, ETF and Institutional share classes) saw their
expenses rise rather than fall over the past six months. The largest increase was a 33%
jump in the expense ratio for
Intermediate-Term Bond Index
’s Institutional Plus shares.
DOW JONES INDUSTRIALS
March Close:
17685.09
STANDARD & POOR’S 500
March Close:
2059.74
4300
4550
4800
5050
5300
MF JDN OSA J JMA
NASDAQ COMPOSITE
March Close:
4869.85
0.00%
0.08%
0.16%
0.24%
0.32%
MF JDN OSA J JMA
3-MO.TREASURY BILLYIELD
March Close:
0.19%
1.6%
1.8%
2.0%
2.2%
2.4%
2.6%
MF JDN OSA J JMA
10-YR.TREASURY NOTE YIELD
March Close:
1.79%
15900
16400
16900
17400
17900
18400
MF JDN OSA J JMA
1850
1900
1950
2000
2050
2100
2150
MF JDN OSA J JMA
AVERAGEVANGUARD INVESTOR*
March:
5.1%
YTD:
1.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
MF JDNOSAJ JMA
*See the footnotes on page 2.
Model Portfolios................................................................ 2
Special Distributions......................................................... 3
More Options for Income................................................. 5
“Best Of” Lists................................................................. 5
More of a Return of, Rather Than a Return onYour Money...6
Funds Focus: Variable Annuities........................................ 7
Performance Review.................................................... 8-11
Do-It-Now Action Recommendations............................. 16
APR I L 2016
SEE
MEME
PAGE 3
>
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
>
SEE
COSTS
PAGE 4