(PUB) Investing 2016

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16 • Fund Family Shareholder Association
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
4 Variable annuities often fall short of their promise. But, if you’re convinced an annuity is
for you, Vanguard’s are some of the cheapest around. (See page 7)
4 Core Bond is the most appealing of Vanguard’s newest income solutions, but there’s no
need to rush into this recently launched fund. (See page 5)
4 Take what you read in the media with a grain of salt. Vanguard expense don’t always
fall and “Best of” lists are not the place to start your investment search. (See pages 1
and 5)
substantially outperformed. The
annuity got a big jump over Explorer
in 1999, when Granahan Investment
Management ran it solo. Today it’s
a multimanager portfolio, with
Vanguard’s in-house equity group added
in 2010, and Arrowpoint Partners added
this past January. With each sub-adviser
now managing a third of the portfolio’s
assets, Arrowpoint’s responsibilities are
largely coming at the expense of a
dwindling Granahan share of the assets.
That might sound like a lot of
changes, but it’s nothing compared to
the game of manager musical chairs
Vanguard has played with Explorer’s
portfolio. There are currently 15 indi-
vidual managers from seven differ-
ent firms stirring the pot at Explorer.
And all those extra managers haven’t
helped performance. Despite higher
fees, Small Company Growth Annuity
outpaced Explorer by 0.5% a year over
the past decade.
Total Stock Market Annuity
Hold. Despite the similarity in
name, Total Stock Market Annuity
is not a perfect clone of its big brother,
Total Stock Market Index. The dif-
ference? Rather than invest directly in
stocks, or even a sampling of stocks,
the annuity was set up as a fund-
of-funds, combining investments in
Extended Market Index (about 20% of
assets) and Equity Index Annuity (the
remainder). I prefer my funds actively
managed for the most part, so this fund
rates a Hold. If you’re looking to add a
smaller-stock component to a portfolio
weighted toward Equity Index, which is
essentially what a “total” market index
does, I suggest trying Small Company
Growth or MidCap Index Annuity,
described above.
International Annuity
Buy. A near-clone of the taxable
International Growth, this portfolio
has actually outperformed the taxable
option by a small margin since inception.
Like its non-annuity counterpart, Baillie
Gifford was added in 2003, and M&G
Investments started running a piece of the
portfolio in 2008. Where the two funds
have differed is that sub-adviser Baillie
Gifford manages more of the annuity
assets (roughly half), and for a while, the
annuity was outpacing the mutual fund
despite higher fees. Vanguard finally
pushed more of International Growth’s
assets to Baillie Gifford, and perfor-
mance has since tilted in favor of the
cheaper mutual fund. n
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