News
March 2018
Solving the Index Fund Gun Issue Is Easy
Guns have rightly become a front-and-center issue for investors–particularly investors in broad U.S. index funds like Total Stock Market Index (VTSMX). I’ve heard from subscribers, as well as clients and family members, who’d like nothing more to do with the gun and ammo stocks in their portfolios. The issue is, as I said, particularly acute for indexers. Read More »
Nine Years On
In today's Wall Street Journal, John Velis, a "macro strategist" from State Street Global Markets is quoted saying that "It's going to be a hard slog, certainly compared to the previous nine years." The implication being that it's been an easy nine years getting to this anniversary and well, now we'd better buckle up the old seat belts. Read More »
February 2018
Vanguard Investors Heavy in Stocks, Low on Cash
Vanguard investors haven't been this heavily invested in stock funds since the tech bubble. Combining U.S. and foreign equity funds, annuities and ETFs, Vanguard investors now have 69% of their assets invested in stocks. (In fact, since the market bottom, their allocation to stocks has risen by almost 55%.) Read More »
January 2018
The Dow Does 4% in 8 Days Pretty Often
Here we go again. The Dow is pushing another "milestone," and those who don't seem to understand percentages are going nuts because, well, if the Dow closes over 26000 today, that'll mark a "remarkable" run of just 8 trading days in which it bounded from 25000 to 26000—a gain of 4%. Read More »
Dow Thresholds: Easier and Easier to Cross
The headlines were breathless when the Dow crossed 24000 for the first time late last year, and now, as the index heads for a close above 25000, I can only imagine the prose that will mark this day. While crossing the 25000 mark for the Dow over just 35 days ties this move with two others for speed, when it comes to investment gain, which is what really counts, this one wasn't anything special. Read More »
Hot Hands 2018
My Hot Hands strategy is a mechanical, momentum-based strategy that relies on the idea that hot hands stay hot and that what's worked over the past 12 months should work over the next 12. The numbers are in, and I have just announced the calendar-year Hot Hands pick for the upcoming year. Read More »
December 2017
Incubation Complete
Ding! The timer just went off at Vanguard, and the chefs have deemed the actively managed Emerging Markets Bond ready for public consumption. What Vanguard failed to mention when it announced yesterday that Emerging Markets Bond would now be available for investment is that the fund has been running live, but in the shadows, since March 2016. Vanguard seeded the fund, managed by Daniel Shaykevich, with $10 million in March 2016, but did not make it available to investors. Read More »
November 2017
Repeat After Me: Factor Investing Is Active Investing
Call it what you want—smart beta, factor investing or even enhanced indexing—Vanguard is getting into the game. But this isn't a new game, and Vanguard isn't new to it. Factor ETFs are just active funds by a different name, and Vanguard's been offering versions tailored to foreign investors since late-2015. Here's Jeff's review and analysis of these strategies as Vanguard and others have tried them before. Read More »
Vanguard Factor ETFs Will Do What They Say, But Won't Make Good Investments
Here come Vanguard's factor ETFs. Liquidity, minimum volatility, momentum, quality and value, plus an all-encompassing multi-factor option in ETF and fund form are slated for introduction in February, if all goes according to a preliminary plan filed with the SEC this morning. In many respects, what Vanguard's doing here is monetizing the work they've done in their quantitative group for years. And that's both good and bad. Read More »
500 Highs
500! It's a big number. It's also the combined total number of all-time highs hit by the Dow and the S&P 500, when you count dividends. That's right, while the two indexes have hit a combined 357 all-time highs since the financial crisis, when you consider dividends, the two major market benchmarks have hit 258 (Dow Total Return) and 242 (S&P 500 Total Return) highs. That's 500 in total. (Yes, it's a bit of a cheat, since I've combined the two indexes in my count—but hey, if nothing else it's great cocktail party chatter.) So, why do total return indexes matter? Because dividends count. When investors look at their account statements they don't just see prices—they see prices and dividends and interest. It's the total return that matters. Read More »
October 2017
Vanguard Sticks With Uber Valuation
Despite a steady diet of news stories that, at a minimum, can’t be enhancing Uber’s valuation, Vanguard didn’t shave one penny off its valuation of the techy-taxi company in its most recent assessment. According to the latest annual report for Vanguard U.S. Growth, as of 8/31/2017 Vanguard continues to value the fund’s 1,408,784 shares of Uber Technologies Preferred at $58,408,000. Read More »
Buy the Highs
This week brings the 10-year anniversary of the pre-Great Recession market peak. And next week brings the 30th anniversary of one of the more frightening single days in modern Wall Street history: Black Monday, Oct. 19, 1987. What lessons can investors take away from these "red letter" days? Read More »
March 2018
Solving the Index Fund Gun Issue Is Easy
Guns have rightly become a front-and-center issue for investors–particularly investors in broad U.S. index funds like Total Stock Market Index (VTSMX). I’ve heard from subscribers, as well as clients and family members, who’d like nothing more to do with the gun and ammo stocks in their portfolios. The issue is, as I said, particularly acute for indexers. Read More »
Nine Years On
In today's Wall Street Journal, John Velis, a "macro strategist" from State Street Global Markets is quoted saying that "It's going to be a hard slog, certainly compared to the previous nine years." The implication being that it's been an easy nine years getting to this anniversary and well, now we'd better buckle up the old seat belts. Read More »
February 2018
Vanguard Investors Heavy in Stocks, Low on Cash
Vanguard investors haven't been this heavily invested in stock funds since the tech bubble. Combining U.S. and foreign equity funds, annuities and ETFs, Vanguard investors now have 69% of their assets invested in stocks. (In fact, since the market bottom, their allocation to stocks has risen by almost 55%.) Read More »
January 2018
The Dow Does 4% in 8 Days Pretty Often
Here we go again. The Dow is pushing another "milestone," and those who don't seem to understand percentages are going nuts because, well, if the Dow closes over 26000 today, that'll mark a "remarkable" run of just 8 trading days in which it bounded from 25000 to 26000—a gain of 4%. Read More »
Dow Thresholds: Easier and Easier to Cross
The headlines were breathless when the Dow crossed 24000 for the first time late last year, and now, as the index heads for a close above 25000, I can only imagine the prose that will mark this day. While crossing the 25000 mark for the Dow over just 35 days ties this move with two others for speed, when it comes to investment gain, which is what really counts, this one wasn't anything special. Read More »
Hot Hands 2018
My Hot Hands strategy is a mechanical, momentum-based strategy that relies on the idea that hot hands stay hot and that what's worked over the past 12 months should work over the next 12. The numbers are in, and I have just announced the calendar-year Hot Hands pick for the upcoming year. Read More »
December 2017
Incubation Complete
Ding! The timer just went off at Vanguard, and the chefs have deemed the actively managed Emerging Markets Bond ready for public consumption. What Vanguard failed to mention when it announced yesterday that Emerging Markets Bond would now be available for investment is that the fund has been running live, but in the shadows, since March 2016. Vanguard seeded the fund, managed by Daniel Shaykevich, with $10 million in March 2016, but did not make it available to investors. Read More »
November 2017
Repeat After Me: Factor Investing Is Active Investing
Call it what you want—smart beta, factor investing or even enhanced indexing—Vanguard is getting into the game. But this isn't a new game, and Vanguard isn't new to it. Factor ETFs are just active funds by a different name, and Vanguard's been offering versions tailored to foreign investors since late-2015. Here's Jeff's review and analysis of these strategies as Vanguard and others have tried them before. Read More »
Vanguard Factor ETFs Will Do What They Say, But Won't Make Good Investments
Here come Vanguard's factor ETFs. Liquidity, minimum volatility, momentum, quality and value, plus an all-encompassing multi-factor option in ETF and fund form are slated for introduction in February, if all goes according to a preliminary plan filed with the SEC this morning. In many respects, what Vanguard's doing here is monetizing the work they've done in their quantitative group for years. And that's both good and bad. Read More »
500 Highs
500! It's a big number. It's also the combined total number of all-time highs hit by the Dow and the S&P 500, when you count dividends. That's right, while the two indexes have hit a combined 357 all-time highs since the financial crisis, when you consider dividends, the two major market benchmarks have hit 258 (Dow Total Return) and 242 (S&P 500 Total Return) highs. That's 500 in total. (Yes, it's a bit of a cheat, since I've combined the two indexes in my count—but hey, if nothing else it's great cocktail party chatter.) So, why do total return indexes matter? Because dividends count. When investors look at their account statements they don't just see prices—they see prices and dividends and interest. It's the total return that matters. Read More »
October 2017
Vanguard Sticks With Uber Valuation
Despite a steady diet of news stories that, at a minimum, can’t be enhancing Uber’s valuation, Vanguard didn’t shave one penny off its valuation of the techy-taxi company in its most recent assessment. According to the latest annual report for Vanguard U.S. Growth, as of 8/31/2017 Vanguard continues to value the fund’s 1,408,784 shares of Uber Technologies Preferred at $58,408,000. Read More »
Buy the Highs
This week brings the 10-year anniversary of the pre-Great Recession market peak. And next week brings the 30th anniversary of one of the more frightening single days in modern Wall Street history: Black Monday, Oct. 19, 1987. What lessons can investors take away from these "red letter" days? Read More »
August 2017
My View On Votes
Vanguard is looking for your vote on a series of shareholder proposals. Last week, the company started a three-month proxy voting campaign to elect trustees and approve a few policy changes. The cynic in me says it doesn't matter how we and other FFSA members vote, because most Vanguard customers are simply going to vote however the Directors say they should. However, as Jeff and I have been getting emails and calls from subscribers asking how we suggest they vote, I figured we should give you our recommendations. Read More »
Minor Change Pits Man Against Index
Vanguard announced this week that three bond index funds (and ETFs) will get new names and portfolio clean-ups in the fourth quarter when the funds transition from tracking government bond indexes to Treasury-only indexes. Read More »
Record Assets? Add A Manager
Has International Explorer, Vanguard's sole actively managed foreign small-cap fund, hit its capacity limits? And if so, is adding another manager going to help or hurt the fund? Read More »
July 2017
Wellington and Wellesley Go Global
Vanguard has announced plans to launch two global balanced funds: Global Wellington and Global Wellesley Income, their first actively managed balanced funds with a global objective. If the new global funds can follow in the footsteps of their domestic siblings, it will be a win-win for investors and Vanguard. But that’s a big “if.” Read More »
Vanguard Board Recommends Votes Against Genocide and Climate Change Proposals
With all the hoo-ha over the changing of the guards at Vanguard—Buckley as President, CEO and board member; Davis as CIO; and Hollyer as Global Fixed Income chief—you could be excused for missing the last two proxy proposals buried in the document that will be voted on by mail or at a shareholder meeting on Nov. 15, 2017.
One shareholder proposal concerns genocide-free investing, and the other concerns climate change. I'll let you read the specific proposals, but Vanguard's board is recommending votes against both. Read More »
April 2017
Lost Decade Watch
At the start of the year, I told you that 2017’s catchphrase would be the “lost decade,” only this time it would be foreign stocks we’d be talking about. Even though non-U.S. stocks were quick out of the gate during the first quarter, the lost decade is still in play. Read More »
December 2016
Hot Hands 2017
My Hot Hands strategy is a mechanical, momentum-based strategy that relies on the idea that hot hands stay hot and that what's worked over the past 12 months should work over the next 12. The numbers are in, and I have just announced the calendar-year Hot Hands pick for the upcoming year. Read More »
Vanguard Fires Chartwell Investment Partners
Vanguard has fired Chartwell Investment Partners, removing them from both Explorer and MidCap Growth. In the case of Explorer, the firm will not be replaced, and its assets divvied up amongst two of the remaining six advisory firms on the fund, Arrowpoint Asset Management and Stephens Investment Management. Read More »
September 2016
15 Years Later
This past weekend marked 15 years since the September 11 terrorist attack. While the weekend was best spent reflecting on those events and appreciating the friends and loved-ones and freedoms that we sometimes take for granted, there is also an important investment lesson we can all learn from the event: Market timing doesn't work. Read More »
July 2016
Vanguard's Multi-Manager Strategy Takes Another Hit
Just days after posting yet another defense of its multi-manager strategy, Vanguard again trimmed managers at funds including Capital Value and International Growth. It was just last month that Vanguard trimmed the management responsibilities at Explorer Value from three to two firms by firing Sterling Capital Management, something I dealt with in the July 2016 issue of The Independent Adviser for Vanguard Investors. Read More »
March 2016
Vanguard Expense Ratios Rise on 52 Funds
Vanguard's been making a lot of hay lately with news that its expense ratios continue to decline. But it's all a matter of how and when you choose to measure them. With the release of its 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 6 months. Read More »
February 2016
Barron's: How to Build an All-Weather Portfolio
Dan was interviewed on Barron's Video to talk about how to invest during a market downturn, and why a major misstep in the markets is a bad time to lose trust in the managers who run your funds. Read More »
Is High Yield Headed for Lows?
Jeff and I often have more to say than we can actually fit in the monthly newsletter. This past month was no exception, as we've received a number of questions about high-yield bonds, and weren't able to find room in the newsletter for a complete response. But we heard your questions and concerns, and didn't want to delay sharing our thoughts. We'll update this info at month's end for inclusion in the March newsletter, but here's our thinking. Read More »
January 2016
Vanguard's One Basis Point Index Funds
Vanguard just filed for an "Institutional Select" share class of Total Stock Market Index and Total Bond Market Index with operating expenses of 0.01%. That's 1 basis point, folks. Of course, the minimum investment is $5 billion for the stock fund and $3 billion for the bond fund. That's billion with a "b." Read More »
Has Vanguard Acknowledged That Multimanagement Isn't as Good as Claimed?
This morning's announcement that Vanguard has reduced the headcount on both Explorer and Morgan Growth, two of the poster children for excessive multimanagement, is good news for the funds' shareholders. But it may not be enough. And Vanguard continues to claim that throwing lots of different management teams at a single portfolio is smart active management. I beg to differ. Read More »
December 2015
Vanguard Launching Active Core Bond Fund
Vanguard is going active on the bond side, proposing to launch Core Bond during the first quarter of 2016.
Core Bond will be run by a trio of Vanguard managers who will build the portfolio using both investment-grade and non-investment-grade bonds. Junk bonds will be layered into the fund up to 5% of assets, "medium quality" bonds will take up as much as 30% of assets and 65% or so of the fund will be invested in government, agency and investment-grade corporate securities. Up to 10% of the fund can be invested in non-dollar denominated bonds. Read More »
October 2015
Vanguard's Gift To Money Fund Shareholders: $112 Million and Counting
Big news for Vanguard money market fund shareholders: Vanguard has now explicitly said that its money market funds (meaning shareholders) will not have to pay back the more than $112 million in fees that it has waived over the past five-plus years. In the just-released annual report for its three taxable money funds, Vanguard has added language that says, "… the fund is not obligated to repay this [fee waiver] back to Vanguard." The language clarifies that Vanguard won't try to claw back millions in fees, something that other mutual fund complexes may be forced to emulate. Read More »
September 2015
Vanguard Seeks Dividends Overseas
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 »
August 2015
Vanguard Launches Two New Funds at Long Last
After five years of delays, cancellations, and more delays, Vanguard has finally launched a municipal bond index fund, Tax-Exempt Bond Index. The fund comes in several forms, including Investor shares (VTEBX), Admiral shares (VTEAX) and ETF shares (VTEB). And that's not all. Vanguard's new Alternative Strategies Fund (VASFX), approved for a launch in late May, is also seeing the light of day—but only for a select institutional audience as well as investors in one of Vanguard's funds-of-funds. Read More »
June 2015
The Individual's Money Fund With the $5 Million Minimum
The press completely missed one of the craziest parts of Vanguard's announcement yesterday that it’s renaming and realigning its money market funds to keep their net asset values at a fixed $1.00 per share by avoiding the “institutional” label. Read More »
Older and Messier–After 10 Years, 49 Managers Can't Make Diversified Equity a Star
At its inception in 2005, Diversified Equity was marketed by Vanguard as a “starter fund for investors seeking a broadly diversified, low-cost equity portfolio,” according to then-Vanguard chairman Jack Brennan. Some of the marketing for the fund, in fact, featured photos of bicycle training wheels. Read More »
Vanguard Partnership Profit Payout Pops
Vanguard employees will see their profit plan payouts grow a tiny bit faster than in years past, but the 13.0% rise in the Partnership Plan dividend, to $165.57 from $146.52, doesn't come close to matching the extraordinary gains the company has made in gathering assets; and asset growth is a big factor, or is supposed to be a big factor, in figuring out what portion of Vanguard's profits will be shared with the rank-and-file Crew. Read More »
May 2015
Vanguard Launches Alternative Strategies Fund
While they can't seem to get their municipal bond index fund off the launch pad, Vanguard did make good on its plans to offer an Alternative Strategies fund, launching it this evening. Alternative Strategies has the option of using long-short strategies, event-driven investing, strategies to attempt to capture mispricing in the bond markets, and commodity contracts and currencies. Fund manager Michael Roach, a member of Vanguard's quant team, is expected to use leverage to amplify the investments in the fund. Read More »
Increasing Bond Volatility—Not Really
The recent rise in bond yields has given way too much talk of increasing volatility in the bond market. I beg to differ. As with the stock market, the recent up and down moves are simply a continuation of a trend we've seen for several years now. Two charts looking at the 10-year Treasury should provide some illumination. Read More »
March 2015
Vanguard 2014 Supplemental Distributions
Vanguard released estimates of the supplemental distributions it will be paying in March for funds that didn't fully distribute capital gains, or income during 2014. There were few surprises in the list and most of the distributions are fractional when compared to funds' Thursday NAVs. Read More »
February 2015
Here Comes Ultra-Short-Term Bond
Vanguard is launching Ultra-Short-Term Bond tonight. This money-market alternative for investors who can withstand a bit of volatility in their share price should be well-received by those who have substantial sums tied up in money funds paying 0.01%. Vanguard's gone back and forth on whether the fund is or isn't a money-fund alternative, but as they've written, it should appeal to investors who'd like to "earn a better return than the near-zero yield of a money market fund without losing the ability to access your money." Read More »
January 2015
Vanguard's Tax-Equivalent Fantasy Yields
The introduction of a new, low-cost municipal bond index fund, like the recent filing for Tax-Exempt Bond Index, is a great time to crow that yields are always higher when costs are lower. And most of the time they are. But there's higher yields, and then there's Vanguard's calculations of those yields—or rather, Vanguard's calculation of the taxable-equivalent yields that its tax-exempt bond funds offer. Read More »
Four Years Later Vanguard Tries a Muni Index Fund—Again
This morning, Vanguard announced plans to introduce a Tax-Exempt Bond Index fund and ETF sometime in the second quarter of 2015. This marks the second time in almost five years that Vanguard has proposed issuing a muni-bond index fund. We'll see if it comes to fruition. Read More »
December 2014
Zero Down Sale on Market Neutral
Now, I don't want you jumping for the keyboard and logging into vanguard.com to trade into this one, but Vanguard has lowered the minimum on its Market Neutral fund to $0. Yes, that's right, $0. But that's only for investors working with financial advisers because, as Vanguard puts it, "given the distinctive characteristics of the fund … [it's] not appropriate for retail investors broadly." Hence the $250,000 minimum remains in place for them. Read More »
November 2014
Vanguard Goes Ultra-Short
It's not going to be a money market fund, but it also isn't going to be your typical short-term bond fund either. Vanguard's soon-to-be launched Ultra-Short-Term Bond fund targets the space in between. So what should investors expect? Read More »
High-Yield Portfolios Have a New Benchmark
High-Yield Corporate and its annuity counterpart, High-Yield Annuity, now have a new benchmark against which they're being compared. Read More »
It Still Pays to Invest Overseas
Comparing the returns of your prudently diversified portfolio to the S&P 500? Prepare to be disappointed. Over the past five years, U.S. stocks have been on a tear, outpacing foreign stocks in developed countries by a whopping 80%. Read More »
For Vanguard Brokerage, It's "Phish" But Is It "Foul"? They Won't Say
Phishing for emails and financial account numbers is a dastardly game that's often played through e-mail. But some Vanguard investors with accounts at Vanguard Brokerage have received letters (real, honest-to-goodness snail-mail letters) offering to reinstate their e-delivery of documents if they'll simply log onto a couple of websites. The letters look really real (copies are attached with names and other relevant data whited out) but according to Vanguard, to whom I sent copies, the letters are fakes. Read More »
October 2014
Scare Tactics and the VIX
The headline is ominous: "CBOE Volatility Index Shows Fears in Financial Markets Highest Since 2012." But here's the thing: The VIX has averaged 13.77 for all of 2014, about the same as 2013. The fact is that the VIX, or "fear gauge," bounces around like a ping-pong ball on illicit pharmaceuticals. Read More »
Vanguarder Wants to "Win"
Recently, I was quoted in The Wall Street Journal in an article on ultra-cheap investment advisers saying, "I don't want my plumber to do my carpentry or my lawyer to do my accounting, and maybe you don't want your investment manager to do your financial planning." After reading a vanguard.com blog post by a Vanguard senior financial planner, I should probably amend that to say that I wouldn't want my financial planner to act as my investment adviser. And you shouldn't, either. Read More »
Hail the New Bond King, and the Largest Bond Fund in the World
Joshua Barrickman, manager of Vanguard's Total Bond Market Index fund and its various U.S. share classes, can now officially don the crown as both the Bond King and the overseer of the largest bond fund in the world. Barrickman may not have the track record that deposed PIMCO CIO Bill Gross built up over multiple decades, nor the public profile, but as of Sept. 30, he does manage the most money in the bond universe. Read More »
September 2014
Vanguard's Million-Dollar Decision Is the Industry's Billion-Dollar Problem
Vanguard is facing a multi-million dollar decision. Its competitors are facing the same decision, but for them it’s measured in billions. The decision: To allow money fund yields to rise as the Fed begins raising interest rates, or to begin paying themselves back for years of self-imposed fee waivers. You can be sure that fund marketers at Vanguard and elsewhere are debating “Which comes first, the chicken or the egg?” right now. Read More »
July 2014
Inversions Hurt Individual Investors, Too
As U.S. corporations move offshore to potentially avoid billions in U.S. taxes—$19.5 billion in tax revenues over the next decade, according to the Joint Commission on Taxation, a non-partisan congressional research panel—they are sticking their shareholders with an unexpected tax burden over which investors have no control. Read More »
Could a Tax Lawsuit Against Vanguard Change the Mutual Fund Industry Structure?
Filed by a former Associate Counsel and tax attorney who worked for Vanguard for just under five years, a recent suit makes some pretty major allegations about the firm's "at-cost" structure.
Since I'm not a tax attorney, I can't debate the merits of the lawsuit or some of the allegations presented in it. But from a broader perspective, this assault on Vanguard's "at cost" operating principle could, if successfully challenged, have seismic implications for the fund industry and possibly put competitors on a more level playing field with Vanguard as far as costs are concerned. Read More »
Survey: 401(k), 403(b), and 457(b) plans
Unfortunately, while we all get roughly the same choice of funds for our IRAs and taxable accounts, the same isn't the case with employer-sponsored retirement plans like a 401(k), 403(b), or 457(b) plan. Every plan is different, and even two plans with investment options from the same fund family might offer two completely different groups of funds. That's where I can help. Read More »
June 2014
Vanguard's Road to Ruin for Explorer Fund
Will it ever stop? Vanguard announced this morning that it is adding yet another asset manager, Arrowpoint Asset Management, to the cockamamie mess that is Explorer Fund, one of its self-described "Select" funds. Read More »
Yields in Context
A lot of ink has been spilled recently asking why bond yields have declined this year, as well as explaining why bond yields are bound to begin rising. The one question that hasn't been asked is: Why does everyone believe bond yields have to head significantly higher? Read More »
March 2014
Has Vanguard Added Value To Selected Value?
In a typical Vanguard move, the firm announced today it is once again muddying the waters of a good stock fund by adding yet a third management team to Selected Value, an $8.5 billion mid-cap fund that performed worse under two managers than under one, and presumably will not see any improvement under three. However, given that Pzena won't be making too much trouble with the fund in the early going given the firm's small initial stake, I'm not as concerned here as I would be if Vanguard had handed over a large chunk of Selected Value's assets. And this isn't the last time you'll see changes at Selected Value, as Jim Barrow, 73, begins stepping further away from this fund. Read More »
Buy High!
Nobody wants to invest at a market peak only to start losing money from the get-go. But should the fear of a potential loss keep us on the sidelines? Research Director Jeff DeMaso ran the numbers for two hypothetical investors over the past 30 years. One bought at the same time each year since 1983, while the other always bought at the worst possible time—i.e., the highest price. The first must be a lot richer than the second, right? The results might surprise you. Read More »
Smart Beta, Dumb Argument
What's the deal with "smart beta," the catch-all term for a form of indexing that deviates from the standard market-cap weighted indexes that are the core of the ETF marketplace and the religion of the index fanatics? Read More »
Vanguard Interested in Active ETFs
This morning, Vanguard filed for “exemptive relief” from sections of the Investment Company Act of 1940 that would allow them to offer an ETF share class of their actively managed, open-end mutual funds. Read More »
February 2014
Vanguard Board Buys Primecap. Why Now? And How?
Last month I asked the question of just why, after years of ignoring its massive appeal and outstanding performance, Vanguard Chairman Bill McNabb finally bought shares in Capital Opportunity (apparently, for the first time) in 2013. Vanguard took umbrage at the questions I posed, saying the trades its directors make and their disclosures are in full compliance with SEC regulations. Of course, because the SEC's rules only require directors to make minimal disclosures, there's a lot more that we don't know than we do know. Read More »
January 2014
Dow Drops 179 Points. So What?!
Normally, I wouldn't think twice about a 1-percent (actually 1.09%) drop in the Dow but given the front-page Money & Investing article in today's Wall Street Journal about investors' choice between selling ahead of a possible market decline, or hanging on in hopes of a rebound, I'm watching the ticks. Yes, that 179.11-point drop is the largest since September 20th's 185.46-point drop, but so what?! Read More »
Active Management Is Back...Sorta
For all the hoopla around ETFs and Vanguard's huge role in that market (plus its dominance in indexing), Vanguard's actively-managed equity funds actually had net inflows in 2013, something I haven't seen in years. Which funds and managers were the beneficiaries? Read on and I'll tell you. Read More »
December 2013
Vanguard Brain Drain: Managers Dropping Like Flies
The final few months of 2013 have been rough ones for continuity at Vanguard. Today's announcement that Explorer's longest-tenured manager, Jack Granahan, will be giving up portfolio responsibilities at year-end was just the latest news of manager loss out of Valley Forge. Read More »
Is Wall Street Bipolar?
Wall Street seems to have a chronic case of bipolar disease. Is lower unemployment good or bad? Is tapering good or bad? Are higher interest rates good or bad? Today's report of a lower unemployment number, a decline from 7.3% to 7.0%, is healthy. Say what you will about the quality of jobs being created, but if more people are earning a paycheck–any paycheck–that's a good thing. (I would note, also, that the U-6 number is declining even faster than the headline unemployment number, which is really good.) The initial read from Wall Street, however, was that lower unemployment might prompt a faster taper, which is bad. Read More »
November 2013
Here Come Those Capital Gains
Mutual fund investors have been living, for a bit anyway, on borrowed time. Losses suffered during the financial crisis were the perfect antidote for capital gains earned during the recovery. That golden period is ending and Vanguard's recent estimates on cap gains for some of its funds show where the tax hits are going to fall. Read More »
Triumph of Indexing? Hardly.
All the jabbering over Vanguard's Total Stock Market Index fund passing PIMCO's Total Return Fund in AUM (assets under management) in October is both wrong and wrong-headed. Read More »
Bob Auwaerter Retiring From Vanguard
Following the lead of former fixed-income head Ian MacKinnon, who retired in June 2003 at the age of 55, Bob Auwaerter, 58, is handing in his green eye shades at the end of March 2014 for what will presumably be a less-taxing role outside of Vanguard. His replacement, Greg Davis, 43, will be Vanguard's third fixed-income chief. Read More »
October 2013
Vanguard Losing Schroder Manager to PIMCO
It hasn't made Vanguard's website, and while the just-released annual report for International Growth mentions the addition of a co-manager for the portion of the fund run by Baillie Gifford, shareholders may be in for a surprise when they learn that longtime Schroder manager Virginnie Maisonneuve is decamping at the end of the year to become Global Head of Equities Portfolio Management at PIMCO. I'm guessing Vanguard was surprised by the announcement as well. Read More »
Fidelity Takes ETF Fee War to Vanguard
This morning Fidelity announced the launch of 10 sector ETFs tracking essentially the same 10 MSCI sector indexes that Vanguard's ETFs track, but at a lower price point. Read More »
Vanguard Cleans House with Mergers
Under the guise of streamlining its fund lineup, Vanguard is sweeping some redundancies and failures under the rug through a series of fund mergers, while also giving more investors access to lower-expense Admiral shares. Read More »
Obamacare Boosts Health Care Stocks
One day into Obamacare, and guess which of Vanguard's sector ETFs was the second-best performer? Health Care ETF. Read More »
September 2013
Update: Details on Vanguard's Low Volatility Thrust
Reducing volatility has struck a chord with investors burned by two bear markets over the past 15 years, who don't think they can stomach another one in the future. True to form, the financial industry, Vanguard included, is responding to this demand with the promise of performance without pain—or at least without lots of pain. Read More »
Friday Morning Wall Street Worries
The sun is shining, the birds are chirping, and yet on Wall Street the worries over the implementation of Obamacare, the debt ceiling debate, the budget, and oh, maybe Iran, Syria and a host of other intangibles are weighing on the markets this morning. Read More »
Vanguard Jumps on Minimum Volatility Bandwagon
Vanguard filed a registration for a Global Minimum Volatility Fund today, with a possible launch date in December. The fund seeks capital appreciation with "low volatility relative to the global equity market." Read More »
Vanguard Pays Capital Gains on Money Markets
Capital gains on your money market fund? As far as I know it's never happened before at Vanguard (though it has happened elsewhere), but at the close of business tonight, Monday, Vanguard's three taxable money market funds will pay out short-term capital gains. Investors and their accountants are in for a big surprise. Read More »
Bid-Ask Spreads: The New ETF Fee War
We haven't heard the last of the ETF fee wars, though operating expenses have now begun to plumb the depths with Vanguard's S&P 500 ETF (VOO) and Total Stock Market ETF (VTI) charging just 0.05% (or 5 basis points). However, the new frontier in low costs is the bid-ask spread, and this morning's announcement that Vanguard is going to do a reverse split on its S&P 500 ETF shares means it's swiftly going to halve the bid-ask disparity on the security—all things being equal. Read More »
Taper On, Taper Off - Give Him Chicken Soup!
It’s just as I said in this month’s newsletter, “Taper on, Taper off.” Today’s jobs report shows that (a) less jobs are being created than thought—BAD; (b) the jobs being created aren’t high-paying jobs—BAD; (c) June and July figures revised down—BAD. Three strikes on the economic recovery. Read More »
June 2013
Global Tumult? Not in the U.S.
Today's Wall Street Journal sports a front-page headline about the markets' "Global Tumult." Inside, the writer talks about volatility and the Dow, specifically saying, "In 10 of the 30 trading days since the Fed's last policy meeting on May 1, the Dow Jones Industrial Average has moved more than 100 points. On five days, it was up; on five, it was down." Read More »
May 2013
Vanguard Launches Total International Bond Index
Vanguard filed documents with the SEC today that shows it has begun operations on Total International Bond Index, its first foray into foreign bonds. The new fund will have Investor (VTIBX), Admiral (VTABX), Institutional (VTIFX) and ETF (BNDX) share classes. The fund, however, is not yet available for investment. Read More »
April 2013
How to Handle Capital Opportunity's Reopening
With Capital Opportunity recently reopened, we have received several questions about whether investors should make any changes to their PRIMECAP-managed holdings. I’ll have more on Capital Opportunity in the upcoming May issue of the newsletter, but let me see if I can clear up any confusion on recommendations regarding the PRIMECAP team and the different ways to invest with them. Read More »
March 2013
Vanguard Finally Shuts Down Florida Fund
Since the 2007 changes to Florida’s tax laws I’ve often asked why Vanguard has insisted on keeping Florida Focused Long-Term Tax-Exempt open after the Florida intangible personal property tax was taken off the books. Well, today, Vanguard announced through a filing with the SEC that it intends to shut the Florida fund down by merging it into Long-Term Tax-Exempt Long-Term Tax Exempt. Read More »
Time in the Market, Not Market Timing
While it wasn’t much, the 0.02% gain in the Dow on Tuesday marked the sixth consecutive record high for the index and the eighth day in a row of gains. But, as you might have figured out, those gains are coming in smaller and smaller percentages. That might beg the question of whether the market is getting tired. I think it’s worth remembering that when markets hit all-time highs or record highs or what-have-you, there are really only two scenarios available on the next day of trading. Read More »
Is It a Dow Record? Kinda.
With about an hour to go before the U.S. markets close, the Dow Jones Industrial Average is heading for a “record” close. But is it really? Yes and no. Read More »
February 2013
Vanguard Raising the Bars a Bit
Vanguard has barred investment advisers and institutions from opening new accounts in Wellington and Intermediate-Term Tax-Exempt. Vanguard is, I believe, responding to two slightly different issues with these funds. Read More »
January 2013
Peter Pays Paul - Vanguard Hikes Payouts on Managed Payout Funds
The 2013 distribution schedule has been established for the three Managed Payout funds, and, lo and behold, monthly distributions are going up! (And you thought yields were falling…) Yields on the three funds are rising from between 3.6% (Managed Payout Distribution Focus) and 9.4% (Managed Payout Growth). Managed Payout Growth & Distribution is seeing its monthly dividend rise 6.8%. Read More »
Vanguard's Sauter Gone, But So Is Bhagat
Buried at the bottom of an SEC filing this morning on Gus Sauter’s retirement was the note on the resignation of Sandip A. Bhagat, who joined Vanguard just four years ago this month as head of Vanguard’s Quantitative Equity Group with “direct oversight responsibility for all active and passive equity portfolios and alternative strategies.” Bhagat was a former head of global asset allocation at Morgan Stanley Investment Management. Read More »
Hot Hands 2013
The numbers are in for 2012. As promised, I have the 2013 Hot Hands fund so you can place your trades before the markets close. And the winner is... Read More »
December 2012
The Rebalancing Myth
Since the stock markets peaked in Oct. 2007, investors in the U.S. have suffered a stunning bear market that saw Total Stock Market fall 50.9% through Feb. 2009, and a resounding bull market that took the fund up 112.8% through Nov. 2012. Meanwhile, in the fixed-income markets, the waters were more tranquil, with Total Bond Market gaining 6.1% during the stock bear market and another 27.9% while stocks rebounded. (Over the full period, Total Stock Market gained 4.5%, while Total Bond Market gained 35.6%.) That whipsaw in the stock markets is just the kind of environment tailor-made for proponents of regular, systematic rebalancing. And with investors looking at a change in tax rates and year-end distributions upon us, it’s little wonder that “rebalancing” is back in the news. But is rebalancing really all that its proponents claim it to be? Read More »
November 2012
Distributions - The Coming Calendar
It happens every year in December: Distribution season. Initial estimates from Vanguard suggest that, once again, this won’t be a particularly onerous year from a capital gains standpoint. Of course, most funds will still have to pay out all of their accumulated income in the form of a dividend, but those amounts tend to be small. Read More »
Capital Gains - More Vanguard Bond Funds Paying Out Next Month
More Vanguard bond funds than stock funds will be paying out capital gains in December, if numbers released yesterday hold. And while ETFs are generally thought to be tax efficient, long Treasury fund Extended-Duration Treasury ETF is on track to pay out 3.5% of its Oct. 31 price as a capital gain, the fourth year in a row the fund will be paying out gains. Several other bond funds could pay north of 1% in capital gains this year. Read More »
High-Yield Corporate Could Reopen, And With Multi-Managers
It took a couple more months than I thought it would, but money is flowing out of Vanguard High-Yield Corporate again, setting it up for a reopening. And, though I think the chances are slim, there could be another manager added to the portfolio if Vanguard feels it’s simply gotten too big for one manager to handle. Read More »
October 2012
Black Monday on Friday - The 25th Anniversary
Friday marks the 25th anniversary of the 10/19/87 market crash, better known as Black Monday. For those who can't remember, the Dow had hit an all-time higher that year on August 25. As is typical after hitting a high, the market consolidated a bit and bounced around, dropping as much as 8.4% before recovering more than half of that loss. But, after a relatively raucous three days when the Dow shed 10.4% and then-Treasury Secretary James Baker expressed some concerns over the weekend about the market's fall, Monday saw markets begin to tumble around the globe starting in the Far East and ending with our market dropping 508 points or 22.6%. Read More »
Short-Term Inflation-Protected Index - Lowest Risk Akin to Money Markets
Vanguard’s Short-Term Inflation-Protected Index begins operations today and is now up on vanguard.com showing risk akin to a money market. Vanguard says it earns its risk rating because “share prices are expected to remain stable or to fluctuate only slightly. Such funds may be appropriate for the short-term reserves portion of a long-term investment portfolio, or for investors with short-term investment horizons (three years or less).” Read More »
Vanguard's New Index Benchmarks - It's All About The Costs
Vanguard said today that index fund and ETF investors are going to be going through a life-change in the months to come: the company is adopting a host of new benchmarks for its signature funds, including Total Stock Market and Emerging Markets Index. Read More »
September 2012
Where's The Beef? And Where Are Vanguard's New Bond ETFs?
With BlackRock’s iShares unit scheduled to lower operating expenses on its ETFs in an effort to re-engage in the market-share battle that Vanguard is currently winning, I’m wondering where Vanguard’s response—the bond funds (and ETFs) that will compete with existing iShares offerings—are hiding. Over the past couple of years Vanguard has filed papers with the SEC to announce a half-dozen new bond index funds and ETFs and ... well, investors are still waiting. Read More »
Ed Owens to Retire; Curtains for Health Care?
Vanguard announced this morning that Health Care manager and Wellington Management partner Ed Owens will retire at year-end after a long and stellar career managing Health Care since its 1984 inception. For the many, many shareholders who own Health Care, is this a signal to bail? Read More »
August 2012
Vanguard Fires AllianceBernstein
AllianceBernstein is out. Period. In a series of filings with the SEC, Vanguard revealed today that it has fired Alliance Bernstein from portfolio management positions on Global Equity, International Value and Windsor. Read More »
July 2012
Vanguard's New TIPS Offering Has a Wrinkle
Vanguard's new TIPS offering has one very unique difference, besides its short-term nature, from the original Vanguard Inflation-Protected Securities fund: It's index-based, and that means it's ETF-eligible. And, in one sense, you could see this as a money fund alternative. Read More »
June 2012
Vanguard Partnership Plan
It pays to be a Vanguard partner—particularly if you’re one of the top dogs. Wednesday, Vanguard announced over its internal communications system, CrewNet, that the 2011 Partnership Plan distribution would rise more than 10% from its 2010 levels. With Vanguard’s top dogs earning the bulk (90% or so) of their compensation from the Partnership Plan, this amounts to a nifty 10% raise—a significantly better return than would have been earned investing in one of Vanguard’s broad-based index funds. Read More »
Vanguard Investors Selling Emerging Markets
Last month investors pulled $675 million out of Vanguard's Emerging Markets ETF (VWO) with a net $800 million coming out of its ETF shares. Read More »
May 2012
High Yield Corporate Closes
This morning, Vanguard announced it has closed its Wellington Management-run High-Yield Corporate bond fund to all new investors except those with Flagship status ($1 million or more in Vanguard assets) or those who pay Vanguard a management fee through its Asset Management service. Read More »
Vanguard Removes Back-End Loads and Fees
You may think the big news this week has been the fallout from the Facebook IPO debacle, or the gamesmanship around the Greek bailout (or lack thereof). But in my book the big news is that Vanguard has stripped the back-end loads off virtually all of its funds. Read More »
April 2012
Total Stock Turns Twenty
Friday, April 27, marks two decades since the introduction of Total Stock Market, the fund that has displaced Vanguard's flagship 500 Index as the internal index fund of choice in Malvern. Total Stock Market not only stands alone as an investment option with Investor, Admiral and various ETF and institutional share classes, but it is also found as a component in a slew of other Vanguard funds, including all the Target Retirement funds, the STAR LifeStrategy funds, and the Managed Payout funds. Read More »
The Passing of a Superb Investor: Howard Bernard Schow 1927-2012
Howard Schow, one of the triumvirate founders of PRIMECAP Management, passed away this weekend in California at the age of 84. To say that he was one of the best yet least-known investors would be a vast understatement. Read More »
February 2012
Emerging Markets Attract Dollars, But Not From Vanguard Directors
Emerging markets funds may be attracting investor dollars, but Vanguard’s directors aren’t going with their new active horse. Not one Vanguard director has any money in the actively managed Emerging Markets Select Stock, including Chairman Bill McNabb who, at the fund’s introduction, said that “active management can add value over time” so long as costs are “kept in check.” Read More »
RIP Asset Allocation
With little fanfare, Vanguard bid adieu to Asset Allocation on Friday, Feb. 10, the fund's last trading day. Assets have now been moved into Balanced Index and fund number 78 (the Admiral shares were #578) is now history. Read More »
Target Retirement 2005 Comes In for a Landing
Vanguard's Target Retirement 2005 took its glide path straight into Target Retirement Income on Friday, though there was nary a word from the control tower (vanguard.com) on the end of the fund's flight. Read More »
January 2012
Vanguard "Hold" on Foreign Bonds a Replay of Muni Bond Delay
Vanguard has delayed the introduction of its two new international bond index funds and ETFs, a move that harkens back to their decision almost exactly one year ago to delay the introduction of the three municipal bond index funds and ETFs. That decision, made as the muni bond market was being roiled, was said to be due, in part, to the fact that fund outflows were rising, and Vanguard said it preferred to wait for the market to stabilize. Read More »
December 2011
Hot Hands 2012
As promised, with the final numbers for 2011 in, I've got the 2012 Hot Hands fund so you can place your trades first thing on Tuesday. And the winner is... Read More »
Warning: Taking Performance Numbers at Face Value Can Be Bad for Your Wealth
Investors are about to be bombarded with some of the most misleading performance numbers of the year. The reason: Many mutual fund ranking systems, services, and tables and charts use 3-year return figures in their calculations and displays. The 3-year numbers through November 2011 completely distort true fund performance. Read More »
November 2011
Marketing Trumps Utility in the Morningstar Olympics
Wow. I have to admit to being completely underwhelmed by Morningstar's latest attempt at "rating" funds on qualitative factors after having spent years defending the utility (or futility) of its quantitative star rankings. Read More »
October 2011
Don't Cry for Vanguard on Fee Waivers
Low interest rates have sapped money market investors' yields, and patience, it's true. But it's also had an impact over at Vanguard, which has finally revealed just how much money its "temporary fee waivers" are costing. In sum: Not much. Read More »
The Steve Jobs I Knew
I had occasion to interact with Steve Jobs several times in the '80s and '90s. As the reporter responsible for covering the software "beat" for Fortune Magazine in the early '80s, I met many of the up-and-coming software gurus including Mitch Kapor of Lotus, Bill Gates of Microsoft, Phillipe Kahn of Borland, Fred Gibbons of Software Publishing, and their peers. Because you really couldn't cover software without a computer, I also was involved in stories and interviews with the heads of Compaq, Dell and, of course, Apple. Read More »
June 2011
Vanguard Waiving Expenses on Money Funds to Prop Up Yields
Vanguard's beginning to worry about yields on its tax-free money markets and is now going to waive some expenses to "maintain a positive yield," it said in an SEC filing late this afternoon. Read More »
May 2011
Vanguard's Newest Annuities Are Also-Rans, Plus Fewer Florida Bonds
Vanguard filed papers today with the SEC to offer two new fund-of-fund annuities that will provide balanced alternatives to their existing Balanced Annuity, which is a clone of Wellington fund. The new annuity portfolios are going to have a tough time keeping up with their older, better sibling. Read More »
Vanguard Lowers Active Minimums As It Fetes Indexing
With virtually no fanfare, Vanguard took its low-cost mantra one step further Tuesday, dropping minimums for the Investor share class on a slew of funds ranging from the Target Retirement series to some of its sector equity funds. While Vanguard's website continues to use the old minimums, the company's filings with the SEC Tuesday say that these new minimums are effective immediately. Read More »
March 2011
Vanguard's Strange New Fund Introduction
It isn't often that a fund company introduces a new fund and, in the same press release, warns investors to be careful investing in it. But that's what Vanguard did this morning when it introduced the new Emerging Markets Select Stock. Read More »
Two-Year Snapback: Who's on Top?
March 9, 2009 marked the low for the markets, and investors during the past bear market. But since then it's been up, up and away. Or has it? Read More »
February 2011
Vanguard Admits Defeat, Will Liquidate Two Quant Funds
Vanguard, in a rare admission of defeat, is liquidating two underperforming quant funds. Read More »
January 2011
Vanguard Dumps Municipal ETFs
Vanguard hits the first bump in the road of its ETF expansion plans since its long-ago S&P suit. Read More »
Money Market Investors Getting No Relief
Money market yields have experienced a wicked decline over the last few days. Read More »
November 2010
Capital Value Reopens
Vanguard announced this morning that Capital Value, the deep-value fund that went through two managers before hitting its stride with the third, closed, and then added a fourth manager, has reopened to new investors. Read More »
Stars in their Eyes
The fund-raters at Morningstar are out, once again, with their Best Funds For [insert year here] list and, as in prior years, it's a mish-mosh of new and old (though mainly new), with a nod to enough load funds that all their clients (at least the big ones) should be happy. Read More »
Torturing the Numbers, Malkiel Shills for Indexing Again
A recent Wall Street Journal Op-Ed by former Vanguard board member and economics professor Burton Malkiel on the virtues of buy-and-hold investing, "Buy and Hold" Is Still A Winner (11/18/10), was another in a series of veiled advertisements for index funds. Read More »
Compensation: Strange Bedfellows, Indeed
It didn't take long for former Vanguard chairman Jack Brennan to land at least one lucrative gig after handing over the reins to Bill McNabb at the beginning of the year. In February, Brennan joined the board of LPL Investment Holdings, the nation's largest independent-contractor broker-dealer. LPL reportedly has some 12,000 brokers under its umbrella, making it one of the largest brokerages in the country. Read More »
Tech Winter: Early Again
Tech Winter, the four-month period between November and February when tech stocks traditionally post some of their best market-beating numbers, is in full force. Read More »
October 2010
Vanguard Remains on the Offensive
Continuing the battle of the ETFs, Vanguard will be launching its S&P-based global non-U.S. REIT index funds and ETF in the next few weeks. Read More »
Vanguard Fires AllianceBernstein: Worst Case of Fund Stewardship at Complex
After years and years and years of underperformance running first all, then two-thirds of the fast-dwindling assets at U.S. Growth with nary a glimmer of hope, and the continued loss of billions of dollars of shareholder assets, Vanguard finally did what it should have done years ago—fired the musical-chairs team of growth managers at AllianceBernstein. Read More »
September 2010
Seeking Overseas Profits, Vanguard Raises Risks
Vanguard's announcement today that it will simplify its funds-of-funds by using the newly re-benchmarked Total International Index is overshadowed, I believe, by the bigger news that it will boost allocations to foreign stocks by 50% (from 20% of assets to 30% of assets) in its STAR LifeStrategy funds, and by anywhere from 50% (Target Retirement Income) to 59% (Target Retirement 2005) in its Target Retirement funds from their August-end levels. Read More »
Vanguard's New ETFs—Quantity versus Quality
The new Standard & Poor's ETFs being introduced by Vanguard this morning are a classic example of the battle between quantity and quality. And yet, when all is said and done, there are more similarities than differences between the S&P indexes these new ETFs track, the MSCI indexes Vanguard has been using for years now, and the Russell indexes that will be the basis for ETFs to be introduced next week, with a few notable exceptions. Read More »
June 2010
In iShares' Face–Vanguard On the Offensive
Today's announcement that Vanguard plans to offer exchange-traded funds, or ETFs, on a series of Russell and S&P indexes, including the S&P 500, is an in-your-face challenge to the dominance of Barclay's iShares unit. This is a marketing move, plain and simple. Read More »
The SEC Takes a Half-Step
Today the SEC proposed new rules they think will help individual investors in target date funds like Vanguard's Target Retirement series, by requiring better disclosure of the funds' asset allocation strategies. But they haven't gone nearly far enough. Read More »
May 2010
Waiving Commissions
After waiving internal expenses on its money market funds, Vanguard announced today it's also waiving commissions for Vanguard Brokerage account holders who trade Vanguard ETFs. Read More »
Managed Payouts: Pulling Back the Curtain
Vanguard has finally revealed the identity of its secret "investment committee" charged with running the Managed Payout funds. Why it was a secret in the first place is beyond me, but that's "Vanguarding." Read More »
March 2010
"Stop Just Investing and Start Vanguarding"
Wow! What a campaign. Vanguard's new marketing push, and trademarking of the new vocabulary word "Vanguarding" (William Safire would have made a mockery of this one) is a major branding exercise that they say will "educate investors about our way of investing." Read More »
January 2010
Managed Payout Funds Cut Distributions
Launched to great fanfare in May 2008, Vanguard's three Managed Payout funds are treading water as investors are looking, but not buying into the concept. Read More »
Multi-Management Muddle Continues
Vanguard announced this morning that it's handing an 8.5% piece of Windsor II to Sanders Capital, and in particular John Mahedy, who used to work on Windsor when he was at AllianceBernstein. Unfortunately, rather than give Mahedy and his team a mandate to run a value fund, Vanguard is simply continuing to add chefs to the Windsor II kitchen, and the meal gets less and less tasty with each one. Read More »
December 2009
Explorer Value: Multi-Management Muddle
Why, oh why does Vanguard insist on piling on the managers? The latest: They aren't even waiting for asset bloat but are simply starting a new fund, Explorer Value, that comes complete with seven managers from three firms running the portfolio. Did someone say "too many cooks"? Read More »
November 2009
Vanguard Files for Inflation-Protected Securities ETF
Vanguard filed for an exemptive motion from the SEC Friday, Nov. 27, that will allow it to offer an ETF-share class of its existing Inflation-Protected Securities fund. Vanguard also proposed allowing existing shareholders of the fund to convert conventional open-end fund shares into ETF shares (though not the other way around). Rounding will be used to keep from issuing fractional shares, so the conversion will not be perfect. Read More »
October 2009
Capital Value Closes
Well, you and I beat Vanguard, and the press, again. As I told you to expect in the October issue of the newsletter posted to AdviserOnline last week, Vanguard has closed its Capital Value fund to new investors for a "cooling-off period." Read More »
August 2009
Vanguard's Bold Bond Advance
As the bond market bumps along near its all-time highs, and investors have become newly enamored of bond ETFs, Vanguard announced it will make an enormous new foray into bond indexing with what appears to be the goal of wresting control of the exchange-traded bond fund market from Barclays' iShares group and going head-to-head with planned offerings from PIMCO as well as new entries that might come from the iShares acquirer BlackRock Inc. Read More »
June 2009
Closing the Barn Door—Late
Once again Vanguard has shut the door on Convertible Securities to try and staunch cash flows. The move was made, in part, to protect manager Larry Keele, who operates in a small market and may be finding it difficult to handle the flow of new cash. Read More »
Cruising the Caribbean
I'd like to invite you to join me for a week-long Caribbean cruise aboard the award-winning Crystal Serenity. Space is limited, so please sign up now if you'd like to come. Read More »
No More Treasury Money Funds for Small Vanguard Investors—Ever!
Vanguard announced today that it is planning to merge its Treasury Money Market fund into its Admiral Treasury Money Market fund in August (around the 11th according to SEC filings). Here's what it didn't say. Read More »
April 2009
Roughing It This Tech Winter
It was a cold Tech Winter this year, but not as frosty as it was for stock market index investors. Back in November, I wrote to you about what I've dubbed Tech Winter—the four-month period from November to February during which technology stocks have traditionally outperformed. I've tracked this phenomenon over the past 24 years and found overwhelming evidence of the trend. While it is not a sure thing every year, the most recent Tech Winter certainly bolsters the theory. Read More »
March 2009
Sound the Alarm: Morningstar Yells "Fire" in Vanguard's House
An alarmist-sounding missive from Morningstar this morning, about rising expense ratios at Vanguard funds, has raised hackles and worried investors that somehow Vanguard has lost its low-cost ethos at the altar of greed that is currently running rampant around Wall Street. Read More »
Where Directors Belly Up to the Counter
Vanguard's Board of Directors is a wealthy bunch, and it includes one CEO who stands to gain a cool $100 million next month as his company, Rohm & Haas, is gobbled up by Dow Chemical in a $16 billion deal. Yet, when it comes to investing in the Vanguard funds which they are tasked to oversee, and which pay their fees, the eat-your-own-cooking commitments by the company's directors vary widely. Read More »
January 2009
Vanguard Shuts Treasury Money Funds
Vanguard filed notice with the SEC this afternoon that it has closed its two Treasury money market funds to new investors. You may recall that they first closed off the funds to new defined benefit plans in December. Now they have been shuttered completely. Those who are already in the funds can continue to invest new monies, but there will be no new accounts opened, Vanguard says. Read More »
Turner Investments Is Finally Out
Vanguard finally got up the nerve to fire Turner Investments after years of horrific performance. What took them so long? Vanguard gave Turner Investments enough rope on Growth Equity (the former Turner Growth Equity fund) to hang not only themselves, but all the fund's shareholders. As one of Vanguard's outside managers once told me, the problem with Turner is that their results give shareholders an opportunity to "commit suicide" every few years. No kidding. Read More »
Payout Cuts for Managed Payout Funds
Shareholders in the Managed Payout funds, which began their first full calendar year in 2009 and make their first monthly dividend payout today have, not surprisingly, had to take a cut to their distributions. The new monthly distributions from the three funds have been cut between 15.8% and 17.6%. Based on last night's closing price the distributions should generate a 12-month distribution yield of between 4.0% and 8.9%. Read More »
December 2008
Vanguard Adds to Precious Metals' Pain
Vanguard released November-end estimates of both capital gains and income distribution amounts for all its funds and, as if the 15.7% capital gains distribution weren't enough for beleaguered shareholders in Precious Metals & Mining, there's also another 4.7% worth of income that appears ready to be passed along at year-end. While only 12 funds are paying capital gains, everyone feels some pain from the distribution of dividend and interest income. Read More »
Value Hunter: Interview with James P. Barrow
At 68, Jim Barrow, lead manager on Windsor II and co-manager on Selected Value, has seen and invested through some of the prettiest and ugliest markets of all time. But even he has been surprised by the depths to which the current market has fallen. When we spoke on November 19, the U.S. markets had just completed another topsy-turvy day ending with a better than 5% loss. But life does go on. Even with the markets in turmoil, Barrow tells me he found time to cook a sweet potato casserole for the office Thanksgiving pot-luck the day before. Always a gentleman and a sage, I think you'll find what he has to say trenchant. Read More »
November 2008
Updated Distribution Estimates
Vanguard has updated its estimates on capital gains distributions. One fund that has been dropped from the list is International Value, which is now not expected to pay out capital gains. Based on last night's prices here are the distribution amounts and percentage of NAV for investor funds. Read More »
Morgan Grows
Do multiple managers really improve performance and/or reduce risk? Vanguard says that Morgan Growth, the first fund to employ a multi-manager format beginning in 1990, has served its shareholders well by doing so. I would beg to differ—strongly. Read More »
ETFs: Performance Reporting
Vanguard's performance reporting on its ETFs doesn't exactly jibe with reality. As I've explained before, what Vanguard "says" its ETFs do and what they do in real life are quite different things. Read More »
Precious Metals Tarnished
It's been a rough year for investors, but probably not nearly as rough for most as it has been for shareholders in Precious Metals & Mining. Now comes word that preliminary estimates show the fund's shareholders are on track to receive a capital gains distribution equal to 14.5% of net asset value. Read More »
October 2008
Vanguard's $200 Billion Question
Vanguard is taking its $200 billion in money market assets down to the wire before the Wednesday deadline for signing up for the Treasury Department's money market insurance plan. Read More »
September 2008
Where Vanguard Investors Are Exposed
Vanguard's value funds split in their buying and selling of American International Group (AIG), Lehman Bros. (LEH) and Washington Mutual (WM) stock over the past quarter. Read More »
Vanguard's Fannie, Freddie and Lehman Positions
In an article posted to its website this morning, Vanguard says that diversification minimized the impact of the destruction of value in Freddie Mac and Fannie Mae shares when the government announced their takeover of the mortgage giants on September 7. And that's true. But that's because those stocks had already seen their prices drop precipitously in prior months. Read More »
Vanguard Dumps Foreign Index Funds
At first glance (and as I reported to you last week) it appeared Vanguard investors had essentially turned tail on their foreign fund assets in August, pulling an estimated $11.6 billion out of Emerging Markets Index, European Index and Pacific Index. Read More »
August 2008
Vanguard a Racketeer? Hardly.
As the doldrums of summer came to a close on August 29, the Friday before the long Labor Day weekend, Vanguard was slapped with a racketeering suit in U.S. District Court in the Southern District of New York. But will the case hold water? Read More »
Reopening Sale–Is International Explorer Next?
You already know that Vanguard reopened both its Explorer and Health Care funds to new investors on Aug. 7 while leaving four other funds, Capital Opportunity, International Explorer, Precious Metals & Mining and PRIMECAP shuttered. In announcing the reopenings, Vanguard simply said that they felt the funds could "accommodate additional assets." Read More »
July 2008
Bent But Not Broken, Investors Sent Vanguard $3.9 Billion in June
With stock markets recovering in April and May, investors shoveled a net $3.9 billion in new money into Vanguard's family of mutual funds and ETFs in June. While inflows were the second lowest for the year, they were still positive. Read More »
June 2008
Vanguard Partnership Dividend Over $100
Better late than never. Vanguard's Partnership Plan dividend finally went over the $100 goal Vanguard Chairman Jack Brennan set in 2001 and expected to meet by 2005. For 2007, it's $101.60 per Partnership Unit, up 10.5% from 2006's dividend of $91.95. Read More »
Stayin' Alive
The Bee Gee's '70s disco hit Stayin' Alive could either be called the theme song for U.S. Growth, or a description of at least one technique by which Vanguard is keeping the underachieving growth fund from simply imploding. Read More »
How Vanguard's Board Invests
The members of Vanguard's board of directors are the individuals charged with watching over the portfolio managers who watch over our money. So, where do they put their own investable cash? Are they eating their own cooking? Read More »
May 2008
Health Care Changes
Vanguard and Wellington Management are laying the groundwork for Health Care's Ed Owens to retire. Read More »
Losing Patience Over U.S. Growth
For all the business school strategy stuff that's found its way to Vanguard headquarters, the one about keeping your cool didn't. It appears Vanguard Chairman Jack Brennan has finally blown a gasket over U.S. Growth. But maybe it's just U.S. Growth's fault. Read More »
Another Injection for International Value
Vanguard's at it again, naming yet a fourth management team to International Value, a large-cap foreign stock fund that has seen its relative performance against various international indices wane as more and more cooks have been added to the broth-making. Read More »
Fun(d) With Numbers
On the home page of Vanguard's web site, you'll find a self-congratulatory story about how well its 275 funds have done relative to their peers. The problem is that Vanguard doesn't offer 275 funds. Here's what really happened. Read More »
Paying the Tax-Man
Those economic stimulus checks are going to come in mighty handy. Vanguard's money funds saw net outflows of more than $4 billion during the month. Presumably, tax bills came due, and after years of low levels of capital gains, investors suddenly had to pay the piper. Read More »
Tax-Efficiency or Outperformance?
I've said it for years: It isn't tax-efficiency that investors should strive for, it's after-tax returns. So just which Vanguard funds produce the best after-tax returns, and are they the same as the most tax-efficient funds? Read More »
Interview: View From Scotland
Though stationed in Edinburgh, Scotland, Edward Hocknell has amassed a terrific performance record investing far afield in emerging markets. He is one of 33 partners at Baillie Gifford, which has managed a piece of International Growth since February 2003. Read More »
April 2008
Baillie Gifford to the Rescue
Whether it's capacity (Global Equity) or performance (Growth Equity), Scottish investment manager Baillie Gifford has been tapped to ride to the rescue on two Vanguard funds. Read More »
Global Rumble
Hot on the heels of its mega-competitor, Barclay's Global Investors, Vanguard is slated to introduce Global Stock Index in both open-end and ETF configurations sometime this quarter. Barclay's iShares unit began trading a similar product on March 26. Read More »
March 2008
March Supplemental Distributions
March is normally a month when many funds make quarterly income distributions. But it's also when funds that didn't pay out enough in December must, after the final accounting, make additional or supplemental distributions. Read More »
Interview: It Takes Time, Not Timing
I recently had a chance to speak with Selected Value's Jim Barrow and Mark Giambrone, and they both agree that the current crisis on Wall Street needs time to run its course. Their insights are always valuable. Listen in. Read More »
February 2008
GMO Is O-U-T
Grantham, Mayo, Van Otterloo, which managed U.S. Value and a piece of Explorer and Small Company Growth Annuity, has been fired by Vanguard's board. In addition, Vanguard announced that International Growth is adding a third manager. Read More »
January 2008
ETF Distribution Confusion
I'm a big fan of exchange-traded funds (ETFs). When I want to index a portion of a portfolio, I find ETFs to be the perfect solution–they're low cost, easy to transact and have no hidden loads. Read More »
December 2007
Recent Volatility and Fund Performance
There's little question that the recent downdrafts in stock markets in the U.S. and abroad have had a substantial impact on both investor returns and psychology. But how much? Read More »
Interview: The Quants Have It
As promised, here's the full text of my interview with Bill Ricks, chief investment officer at AXA Rosenberg, the quantitative money manager behind a share of Explorer, U.S. Value and the new Market Neutral fund. Read More »
Vanguard Update: Distributions and Long-Dated Treasurys
The new numbers are out. According to month-end estimates from Vanguard, here's the percentage of NAV that funds will be paying out in both income and capital gains in the coming weeks. Read More »
November 2007
Distribution Calendar
Because capital gains will be larger this year than in years past as funds have worked off their realized losses and the bull market's impact is finally being paid out to shareholders, it's important to keep an eye on the distribution calendar this year. Read More »
October 2007
Vanguard's Model Portfolio
Most investors probably gave little notice to Vanguard's latest addition to its fund line-up, particularly since the new Select Multi-Asset Pool is actually a funding option unique to the Vanguard Charitable Endowment. Read More »
September 2007
Vanguard Wants Your Retirement Money
Today Vanguard filed with the SEC to offer three Managed Payout funds with three levels of risk: Managed Payout Real Growth, Managed Payout Moderate Growth and Managed Payout Capital Preservation. Read More »
Mega Indexes
Ever hear of Mega Millions, the lottery game promising untold riches in the biggest jackpot in the country? Well, Vanguard isn't making promises of course, but they are introducing three mega-cap index funds. Read More »
Correction: New IRA Beneficiary Policy
It appears that Vanguard's changes to their IRA policies were just as confusing to me as they were to many investors. I initially reported that Vanguard will now only allow one beneficiary for similar IRA plan types. I was close, but not quite right. Read More »
August 2007
Vanguard Goes Market Neutral
Vanguard is proposing to offer a market-neutral mutual fund run by both AXA Rosenberg and Vanguard's Quantitative Equity group. The fund will hold both long and short positions, a first for Vanguard. Read More »
Interview: Robert F. Auwaerter, Vanguard Fixed Income Group
Bob Auwaerter is the go-to guy when I've got questions about bonds, and I had a few questions last week as the subprime mess began to get messier. Read More »
Sup-Prime Woes
Hedge funds, private equity funds and mortgage companies are all feeling the reverberations from the sub-prime lending crisis. Wall Street appears to be in a near-panic. But is the 2007 debt 'crisis' really going to throw our economy into a freefall? Read More »
Volatility Returns, Sorta
With the wild swings in the stock market these past couple of weeks, I've been asked whether this represents some kind of new paradigm in trading, or if it's really business as usual. After looking at a couple of metrics, I'd say it's both. Read More »
July 2007
Managers Earned Fewer Fees in '06
The data is now complete. While 2006 was a very good year for lots of Vanguard funds and shareholders, it was the worst year since 2000 for managers whose bonuses are tied to performance. So what happened? Let's take a look. Read More »
Taking Bond Risk to a New Level
Vanguard's new ultra-long term bond fund, Extended Duration Treasury Index, is one risky bit of work. But while the press has focused on the institutional funds' uses for pension plans, its ETF shares could be used to make bets on interest rates. Read More »
June 2007
Vanguard Partnership Profits Up 13%, Again!
Vanguard Chairman Jack Brennan announced that Vanguard's Partnership Plan dividend for 2006 will be $91.95 per Partnership Unit. Despite booming growth, Brennan has still not been able to meet his 2002 goal of $100 per Partnership Unit by 2005. Read More »
Your Teenager's Retirement–What You Can Do Now
I'm sure you've already taken steps toward securing your own retirement, but have you ever thought about how you could help your kids or grandkids save for theirs? It's never too early to start. Read More »
5% – So what?!
The rapid surge in bond yields and decline in bond prices over the past few days has driven the worry-prone to predict near-calamity for investors. Read More »
April 2007
U.S. Growth Three Years Later
April 19, 2004, probably has little resonance with most Vanguard investors. But the date surely sticks in the mind of longtime U.S. Growth shareholders. That day, Vanguard finally admitted something was wrong with the way Alliance Capital was running the fund. Read More »
March 2007
Another Dow(n) Day
Once again, problems in the market for sub-prime mortgages and a less-than-optimal report on retail sales in February have conspired to push stocks lower today. But while the number of Dow "points" may look large, the fact is that on a percentage basis this is really nothing much to worry about. Read More »
Catch Us on TV Tonight
Tonight, March 6, I'll be appearing on Nightly Business Report with my colleague Jim Lowell, editor of Fidelity Investor, in an interview with NBR Anchor Paul Kangas about funds posting best performances and potential sectors of future growth. Read More »
Jack Bogle Rewrites History
I don't think anyone expected Jack Bogle to retire quietly into the night after his ouster from The Vanguard Group in 1999. But over the past several years, Bogle's speeches, articles and op-eds have increasingly taken on a revisionist's tenor. Read More »
January 2007
More Manager Changes
Vanguard's announcement on January 8 that it was firing two of Windsor II's managers and replacing them with one, plus adding a fourth manager to Morgan Growth, wasn't a complete shock insofar as Vanguard often makes these kinds of moves early in the year. Read More »
December 2006
Muni Money Yields Flying Higher
It's that time of year again. The snow has begun to fall (out West, at least). Goldman Sachs' bonuses are making big news on Main Street as well as Wall Street. And yes, tax-exempt money market fund yields are soaring! Read More »
World ex-USA Index – Much Ado About ETFs
Vanguard's December announcement of the new World ex-USA Index fund set off a round of articles on the 'uniqueness' of its benchmark, due to its inclusion of Canada. But they all missed the real story. Read More »
Deflation for your TIPS
Vanguard's Inflation-Protected Securities fund is going to go dividend-less in the fourth quarter of 2006 because of deflation. That's right--there's not going to be a quarterly payout from the TIPs fund in December. Read More »
November 2006
Bad Bond Timing
Many of you have seen my analysis of stock market timing by Vanguard investors and how poorly they've done. But what caught my eye last month was the deluge of cash that poured into Total Bond Market. Apparently, bond investors are also lousy market timers. Read More »
Interview: Ronald Wayne Holt
International Value's co-manager, Ron Holt, has lots to say, and we had to edit this interview to fit into the November newsletter. Here's the extended version. Read More »
October 2006
Year-End Distributions Should Not Be Onerous
As the year-end distribution season approaches, the question on some shareholders' minds is just how large this year's capital gains payouts will be. Read More »
The Dow Regained Its High Months Ago
Don't Dividends Count?
The high-fives and back-thumping that accompanied the Dow Industrial Average's close over 11722.98 had nothing to do with the Dow hitting a new record. Wall Street seems to have completely forgotten that dividends matter–in fact, they matter a lot! Read More »
July 2006
VIPERs Aren't VIPERs Any Longer
Are Vanguard Bond ETFs Next?
In a surprise move this afternoon, Vanguard filed papers with the SEC changing the names of all of its Vanguard Index Participation Equity Receipts, or VIPERs, to ETF Shares. The VIPER name is gone. Read More »
June 2006
The Number Is 1.72%
It took 30 days, but Dividend Appreciation Index now has a yield--officially. And, as I've warned since the initial announcement, well before the fund began trading, this is definitely not a high-yield stock fund. Read More »
High-Yield Corporate Lives
Every once in a while I get the feeling that things are going on behind the curtain at Vanguard that no one really wants you to see–kind of like that sausage-making plant you keep hearing about. Read More »
May 2006
Windsor II's Changing Stripes
It just isn't the fund it used to be. Windsor II was once one of the best large-cap value funds in the business. Run principally by Jim Barrow of Barrow, Hanley, Windsor II consistently outperformed most benchmarks thrown in its path. Read More »
March 2006
Changing of Wellington's Guard
The pace of manager retirement is picking up at Wellington Management as a generation of top investors is folding up the tent and a new, younger crop is taking on leading roles at Vanguard funds. Read More »
Vanguard Supplemental Distributions
Vanguard released estimates today of supplemental distributions that will be paid out, along with regular quarterly distributions, during March. The funds affected are Energy, Extended Market Index, Health Care, Long-Term Treasury, Precious Metals & Mining, SmallCap Growth Index, SmallCap Index, SmallCap Value Index, Tax-Managed Capital Appreciation, Tax-Managed International and Tax-Managed SmallCap. Read More »
February 2006
Eating Their Own Cooking?
Some Managers are on Diets
With just two days to go before the filing deadline, Vanguard completed its task of identifying just which of its myriad managers are actually eating their own cooking--investing substantial sums in the funds they manage--or taking a pass. Read More »
Quants In Force
It was only a couple of weeks ago that Vanguard announced the pending introduction of Strategic SmallCap Equity, a quantitatively-run fund similar to Strategic Equity. Today, Vanguard said it will also be introducing Structured LargeCap Equity, another quant fund run by their internal Quantitative Equity Group. Read More »
Changes at Vanguard-- New Fund, New Managers, New Fees
Vanguard announced a series of big and small changes this morning, including its filing for a new quantitative fund focused on small-cap stocks. It also made some other filings with the SEC that it didn't mention in its press release. Read More »
January 2006
Tax Efficiency--Not the Critical Question
It isn't funds that have a high tax efficiency that will make you more money at the end of the day--it's funds with great after-tax or tax-adjusted returns. Read More »
Windsor II Gets More Help
Windsor II got a sixth manager on January 4, with the announcement that Armstrong Shaw Associates of New Canaan, CT, would be slowly building a stake in the fund's portfolio. Read More »
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"America's leading expert on investing in Vanguard funds"
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 »
Model Portfolio Performance
| Models | March | YTD |
| Growth | -0.6% | 0.4% |
| Conservative Growth | -0.8% | 0.2% |
| Income | -1.2% | -0.5% |
| Growth Index | -0.6% | 0.0% |
| The average Vanguard investor |
-0.8% | -0.7% |