It's been a while since we've seen paper losses in our portfolios like those suffered over the past few months, and the fact that the calendar quarter has just ended means there'll be an inordinate focus in the media on the past few months' returns. But what we've experienced is actually quite normal. Historically, our Model Portfolios have been down during 25% to 29% of all three-month periods since their inception, yet their long-term returns remain excellent. So I wouldn't chalk this up to anything more than what it is–a market setback. It isn't a loss unless you sell. And as Don Kilbride, manager of Dividend Growth, pointed out when Jeff and I spoke to him recently, selling just means you have to make another decision about what to do with the proceeds–or in other words, creates a reinvestment risk you didn't have before.
In this month's issue, Jeff and I have our complete interview with Don. I hope you take note of what he has to say, because his fund has given us a 73.1% return since I added it to our Models, while its index competitor, Dividend Appreciation Index, has returned just 58.3%. So much for the triumph of indexing the media has been touting lately. In reality, the active versus passive investing debate is largely a distraction, and I'll explain why in the newsletter. (Did you know Jack Bogle owns both actively managed funds and even shares in his own son's hedge fund?) But getting back to the issue of selling, while the media likes to make it sound like investors all rush for the exits at the first sign of trouble, the fact is most investors actually stay in their seats. So there is no reason to panic over sensational predictions like the one made by a prominent analyst in 2010 claiming the following year would bring widespread defaults in the municipal bond market. That said, don't jump for a muni fund just because it's tax-exempt—what you really want to look for is the best after-tax return, as Jeff and I will show you in the conclusion to our multi-month series on bonds. Read More »
September was lousy for stocks, but only half as bad as August, and the third quarter was one of the worst calendar quarters since 2011. Does that mean the sky's falling? Hardly. Jeff and I have been saying for many months now that a 10% to 15% correction was in the cards—we didn't say (or know) when, but simply figured that having gone for so long without one, we'd have to prepare emotionally, if nothing else, for the inevitability of a market downdraft. Well, we've had one with the Dow and S&P indexes falling at one point to just shy of 15% but ending the quarter off 11.1% and 9.9%, respectively, from their all-time highs. Read More »
Bowing to investor demands for greater income, and finding it in non-U.S. stocks, Vanguard filed plans with the SEC today to launch two new funds, International Dividend Appreciation Index and International High Dividend Yield Index in both open-end and ETF formats. The funds are expected to launch on Dec. 7. Read More »
Most Recent Forum Threads
KevinLangan (10-06-2015) wrote: A 80/20 or 90/10 probably would give you a 10% long term avg. Annual return. But the asset allocation split makes a big difference. I still have the book at home. Will have to see what asset split produced a 10.4% return. More later. Read More »
butwait (10-06-2015) wrote: One of the better books that I've read about the 2008 real estate/mortgage market crash was "Reckless Endangerment." There was reckless endangerment of the entire nation by people at the highest levels of Washington and corporate America. The Reckless Endangerment book names names to show how, over the last 15... Read More »
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Daniel P. Wiener is editor of The Independent Adviser for Vanguard Investors, a monthly newsletter that keeps abreast of recent developments at Vanguard, and the annual FFSA Independent Guide to the Vanguard Funds. Through his newsletter and guide book, Dan helps tens of thousands of Vanguard investors choose wisely among more than 100 Vanguard mutual funds. The Adviser is a five-time winner of the Newsletter Publishers Foundation's Editorial Excellence Award. View More »
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