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A PUBLICATION OF FUND FAMILY SHAREHOLDER ASSOCIATION • VOL. 26, NO. 10
A Record Quarter
FORGET ALL THE EXCITEMENT
around the first presidential debate or OPEC’s
late-month decision to try again to rein in overproduction and boost the price of oil
once and for all. The great distraction in September was the “will they or won’t they”
prospect of a Fed interest-rate hike. They didn’t, and that almost certainly means that
it will be December 14 at the earliest before we see even a quarter-point boost to the
fed funds rate.
Uncertainty around the Fed brought volatility back to the stock market following a very
sleepy summer. After only a single day in all of July and August when the S&P 500 rose or
fell by more than 1%, September held five such days. I’m not going out on a limb to predict
that volatility will continue—the Presidential election just five weeks away and a likely Fed
rate hike a month later virtually guarantees it. But even without those headline events on the
calendar, remember that volatility, defined as rapidly rising and falling prices, is par for the
course when it comes to investing in the wealth-building engine that is the stock market.
Still, September defied expectations. I told you that September, not October, has his-
torically been the worst month for the stock market. Well,
500 Index
actually gained
a microscopic 0.01%, and
S&P 400 MidCap Growth ETF
,
the worst performer of the
more narrowly-focused index funds, dropped just 1.4%. Take a somewhat longer perspec-
tive, and U.S. and foreign stocks and bonds are all showing gains ranging from 5.2% to
14.9% over the past 12 months.
Financial stocks, along with health care stocks, have been particular losers this year,
and September was a doozy, with
Financials ETF
the worst performing fund in
The Independent Adviser for Vanguard Investors
and FFSA are completely independent of The Vanguard Group, Inc.
FUNDS FOCUS
> GROWTH FUNDS—LARGE-CAPS
Walk Softly and Hire a Great Manager
SINCE STOCKS REACHED THEIR LOWS
in February 2009, even the worst-performing
of Vanguard’s large-cap growth funds has doubled in value. So it’s fair to ask if there is
still room for growth funds to continue growing. The answer is yes, but climbing valua-
tions have me treading carefully.
When Dan and I looked at large-cap growth funds three years ago, the message was,
“Opportunity remains, but check your expectations at the door.” Our concern at the
time was that these funds had been on a hot streak, with annual returns over three years
approaching 20%, and that investors might be expecting that level of return moving for-
ward. We didn’t think these funds were facing an imminent drawdown, but also didn’t
see them maintaining that blistering pace of gains. That wasn’t a particularly difficult call
DOW JONES INDUSTRIALS
September Close:
18308.15
STANDARD & POOR’S 500
September Close:
2168.27
4200
4500
4800
5100
5400
SA J JMAMF JDN O
NASDAQ COMPOSITE
September Close:
5312.00
0.00%
0.07%
0.14%
0.21%
0.28%
0.35%
SA J JMAMF JDN O
3-MO.TREASURY BILLYIELD
September Close:
0.26%
1.2%
1.4%
1.6%
1.8%
2.0%
2.2%
2.4%
SA J JMAMF JDN O
10-YR.TREASURY NOTE YIELD
September Close:
1.61%
15700
16300
16900
17500
18100
18700
SA J JMAMF JDN O
1820
1900
1980
2060
2140
2220
SA J JMAMF JDN O
AVERAGEVANGUARD INVESTOR*
September:
0.3%
YTD:
6.7%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
SAJ JMAMF JDNO
*See the footnotes on page 2.
Funds Focus: Growth Funds—Large-Caps........................ 1
Model Portfolios................................................................ 2
Performance Review.................................................... 8-11
Interview: Jean Hynes.................................................... 12
Growth & Income Is Back............................................... 14
Early Success for Tax-Exempt Index Fund....................... 15
Special Distributions....................................................... 15
Dan’s Do-It-Now Action Recommendations.................... 16
OCTOBER 2016
SEE
RECORD
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
FOCUS
PAGE 4