(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 A slimmed-down International Growth looks even more attractive than it already was.
Stick with this fund to gain exposure to foreign markets. (See pages 1 and 4)
4 Capital Value is going back to its roots with David Palmer as its sole manager, but I
wouldn’t rush to buy the fund. (See page 4)
4 Talking heads will tell you that volatility is off the charts and a recession is around the
next corner. But a look at market history tells a different tale. Stick to the facts, and your
long-term investment plan. (See pages 5 and 6)
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When I started this newsletter in 1991, I had
to thumb through paper SEC filings and copy
fund data by hand. But now, thanks to advances
in technology and the efforts of our team at
InvestorPlace, Jeff and I are able to bring you
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it’s updated every month. (Some data is even
updated daily.)
But unlike either, it gives you direct access to a
suite of online, interactive charts, tables, and other
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database—and it’s designed to work with any
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And the best part is, you can get the Fund
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800/211-7641 and mention code MT9207.
provided some strong competition
for International Explorer, which had
Vanguard’s foreign small-cap arena to
itself for years. Tracking the FTSE
Global Small-Cap ex-U.S. index, World
ex-U.S. SmallCap Index holds more
than 3,300 stocks, with nearly half its
assets in companies in Japan, Canada,
the U.K. and Taiwan. As is true in the
U.S., smaller companies can be faster
growers, and hence are a good com-
ponent in a growth-oriented portfolio.
When International Explorer is in a
relative performance funk, this fund
could be just the ticket to finding high
growth rates beyond our shores. But
right now I’m not pounding the table
for either fund. n
>
light on this scare-mongering tactic)
and I crunched the numbers. For each
month since 500 Index’s inception, we
calculated the spread of the 10-year and
2-year Treasury yield and the return of
500 Index over the next 12 months. We
then divided those months into one of
three buckets based on the spread in
Treasury yields: spreads less than 0%
(an inverted yield curve), spreads of
0% to 1%, and spreads greater than
1%. Finally, we calculated an average
return for 500 Index over the ensuing
12 months for each bucket.
As you can see in the summary table
on page 7, when the 10-year to 2-year
Treasury spread has been between 0%
and 1%, as it is today, 500 Index expe-
rienced its strongest returns on average
over the following year. Additionally,
during these times, stock losses hap-
pened with less frequency. As I said,
the current shape of the yield curve por-
tends a strong, not weak, period ahead
for the stock market.
Of course, there are many factors
that combine to determine how stocks
(and bonds) will fare over the months
to come. But the yield curve is not
signaling a recession today. Again, it
isn’t until the yield curve inverts that
we should expect to see below-average
stock market returns and above-average
chances for loss sometime in the future.
From Brexit to terrorism, there’s no
shortage of scary headlines for inves-
tors to focus on. But the yield curve’s
recent flattening shouldn’t be one of
them. As I said, it’s a bullish, rather
than a bearish, indicator. n
WRONG FROM PAGE 7 >