Trading Floor Architecture Trading Floor Architecture Executive Overview O aumento da concorrência, o maior volume de dados do mercado e as novas demandas regulatórias são algumas das forças motrizes das mudanças da indústria. As empresas estão tentando manter sua vantagem competitiva mudando constantemente suas estratégias de negociação e aumentando a velocidade de negociação. Uma arquitetura viável deve incluir as tecnologias mais recentes dos domínios de rede e de aplicativos. Tem que ser modular para fornecer um caminho gerenciável para evoluir cada componente com uma interrupção mínima no sistema geral. Portanto, a arquitetura proposta por este artigo é baseada em uma estrutura de serviços. Examinamos serviços como mensagens de latência ultra-baixa, monitoramento de latência, multicast, computação, armazenamento, virtualização de dados e aplicativos, resiliência comercial, mobilidade comercial e thin client. A solução para os requisitos complexos da plataforma de negociação da próxima geração deve ser construída com uma mentalidade holística, cruzando os limites dos silos tradicionais, como negócios e tecnologia ou aplicativos e redes. Este documento, principal objetivo, é fornecer diretrizes para a construção de uma plataforma de negociação de latência ultra baixa, ao mesmo tempo em que otimizamos a taxa de transferência e taxa de mensagens em bruto, tanto para os dados do mercado quanto para os pedidos de negociação FIX. Para conseguir isso, estamos propondo as seguintes tecnologias de redução de latência: conectividade entre conexões de alta velocidade ou 10 Gbps para o cluster de negócios Buscador de mensagens de alta velocidade Aceleração de aplicativos via RDMA sem re-código de aplicativo Monitoramento de latência em tempo real e re-direção de Tráfego comercial para o caminho com menor latência Tendências e desafios do setor As arquiteturas de negociação de próxima geração têm que responder ao aumento das demandas de velocidade, volume e eficiência. Por exemplo, espera-se que o volume de opções de dados de mercado dobre após a introdução das opções de negociação de penny em 2007. Também há demandas regulatórias para a melhor execução, que exigem o manuseio de atualizações de preços a taxas que se aproximam de 1 msgs. Para trocas. Eles também exigem visibilidade sobre o frescor dos dados e prova de que o cliente obteve a melhor execução possível. No curto prazo, a velocidade de negociação e inovação são diferenciadores-chave. Um número crescente de negociações é tratada por aplicativos de negociação algorítmica colocados o mais próximo possível do local de execução comercial. Um desafio com esses mecanismos de negociação quotblack-boxquot é que eles compõem o aumento de volume ao emitir ordens apenas para cancelá-los e enviá-los novamente. A causa desse comportamento é a falta de visibilidade em que local oferece melhor execução. O comerciante humano é agora um engenheiro financeiro quot, quotquantquot (analista quantitativo) com habilidades de programação, que pode ajustar os modelos comerciais sobre a marcha. As empresas desenvolvem novos instrumentos financeiros, como derivados do tempo ou transações de classe de ativos cruzados, e precisam implementar os novos aplicativos de forma rápida e escalável. A longo prazo, a diferenciação competitiva deve ser feita a partir da análise, não apenas do conhecimento. Os comerciantes de estrelas de amanhã assumem riscos, conseguem uma verdadeira visão do cliente e sempre superam o mercado (fonte IBM: www-935.ibmservicesusimcpdfge510-6270-trader. pdf). A resiliência empresarial tem sido uma das principais preocupações das empresas comerciais desde 11 de setembro de 2001. As soluções nesta área variam de centros de dados redundantes situados em diferentes regiões geográficas e conectados a vários locais de negociação para soluções de comerciantes virtuais que oferecem aos comerciantes de poder a maior parte da funcionalidade de um piso comercial Em um local remoto. O setor de serviços financeiros é um dos mais exigentes em termos de requisitos de TI. A indústria está passando por uma mudança arquitetônica para Arquitetura orientada a serviços (SOA), serviços da Web e virtualização de recursos de TI. A SOA aproveita o aumento da velocidade da rede para permitir a ligação dinâmica e a virtualização de componentes de software. Isso permite a criação de novas aplicações sem perder o investimento em sistemas e infraestrutura existentes. O conceito tem o potencial de revolucionar a forma como a integração é feita, permitindo reduções significativas na complexidade e custo dessa integração (gigaspacesdownloadMerrilLynchGigaSpacesWP. pdf). Outra tendência é a consolidação de servidores em fazendas de servidores de centros de dados, enquanto as mesas comerciais possuem apenas extensões KVM e clientes ultrafinos (por exemplo, soluções de lâminas SunRay e HP). As redes de área metropolitana de alta velocidade permitem que os dados de mercado sejam multicast entre diferentes locais, possibilitando a virtualização do piso comercial. Arquitetura de alto nível A Figura 1 descreve a arquitetura de alto nível de um ambiente comercial. A planta ticker e os mecanismos de negociação algorítmica estão localizados no cluster de negócios de alto desempenho no centro de dados das empresas ou na troca. Os comerciantes humanos estão localizados na área de aplicativos do usuário final. Funcionalmente, existem dois componentes de aplicativos no ambiente comercial, editores e assinantes da empresa. O ônibus de mensagens fornece o caminho de comunicação entre editores e assinantes. Existem dois tipos de tráfego específicos para um ambiente comercial: informações de preços do Market DataCarries para instrumentos financeiros, notícias e outras informações de valor agregado, como a análise. É unidirecional e muito sensível à latência, tipicamente entregue ao multicast UDP. É medido em updatessec. E em Mbps. Os fluxos de dados de mercado de um ou vários feeds externos, provenientes de provedores de dados de mercado, como bolsas de valores, agregadores de dados e ECNs. Cada provedor tem seu próprio formato de dados de mercado. Os dados são recebidos por manipuladores de alimentação, aplicativos especializados que normalizam e limpam os dados e enviam-no aos consumidores de dados, como motores de preços, aplicativos de negociação algorítmica ou comerciantes humanos. As empresas que vendem também enviam os dados do mercado para seus clientes, empresas de compra como fundos de investimento, hedge funds e outros gerentes de ativos. Algumas empresas compradoras podem optar por receber feeds diretos dos intercâmbios, reduzindo a latência. Figura 1 Arquitetura de negociação para uma empresa SideSell Side Firm Não existe um padrão industrial para formatos de dados de mercado. Cada troca tem seu formato proprietário. Os provedores de conteúdo financeiro, como a Reuters e Bloomberg, agregam diferentes fontes de dados de mercado, normalizam e adicionam notícias ou análises. Exemplos de feeds consolidados são RDF (Reuters Data Feed), RWF (Reuters Wire Format) e Bloomberg Professional Services Data. Para entregar dados de mercado de baixa latência, ambos os fornecedores lançaram feeds de dados de mercado em tempo real que são menos processados e têm menos análises: Bloomberg B-PipeWith B-Pipe, Bloomberg deslocam o feed de dados de mercado de sua plataforma de distribuição porque um terminal Bloomberg Não é necessário para obter B-Pipe. Wombat e Reuters Feed Handlers anunciaram apoio para a B-Pipe. Uma empresa pode decidir receber feeds diretamente de uma troca para reduzir a latência. Os ganhos na velocidade de transmissão podem variar entre 150 milissegundos e 500 milissegundos. Esses feeds são mais complexos e mais caros e a empresa tem que construir e manter sua própria planta de ticker (financetechfeaturedshowArticle. jhtmlarticleID60404306). Ordens de troca Esse tipo de tráfego traz os negócios reais. É bidirecional e muito sensível à latência. É medido em messagessec. E Mbps. Os pedidos originam-se de uma empresa compradora ou comercial e são enviados para locais de negociação como um Exchange ou ECN para execução. O formato mais comum para o transporte de pedidos é FIX (Informações Financeiras eXchangefixprotocol. org). As aplicações que manipulam mensagens FIX são chamadas de motores FIX e eles se interagem com sistemas de gerenciamento de pedidos (OMS). Uma otimização para FIX é denominada FAST (Fix Adapted for Streaming), que usa um esquema de compressão para reduzir o comprimento da mensagem e, de fato, reduzir a latência. FAST é direcionado mais para a entrega de dados de mercado e tem potencial para se tornar um padrão. FAST também pode ser usado como um esquema de compressão para formatos de dados de mercado proprietários. Para reduzir a latência, as empresas podem optar por estabelecer acesso direto ao mercado (DMA). DMA é o processo automatizado de rotear uma ordem de valores mobiliários diretamente para um local de execução, evitando assim a intervenção de um terceiro (towergroupresearchcontentglossary. jsppage1ampglossaryId383). O DMA requer uma conexão direta com o local de execução. O barramento de mensagens é um software de middleware de fornecedores, como Tibco, 29West, Reuters RMDS, ou uma plataforma de código aberto como o AMQP. O barramento de mensagens usa um mecanismo confiável para entregar mensagens. O transporte pode ser feito através de TCPIP (TibcoEMS, 29West, RMDS e AMQP) ou UDPmulticast (TibcoRV, 29West e RMDS). Um conceito importante na distribuição de mensagens é o fluxo quotópico, que é um subconjunto de dados de mercado definidos por critérios como o símbolo do ticker, a indústria ou uma determinada cesta de instrumentos financeiros. Os assinantes se juntam a grupos de tópicos mapeados para um ou vários sub-tópicos para receber apenas as informações relevantes. No passado, todos os comerciantes receberam todos os dados do mercado. Nos atuais volumes de tráfego, isso seria sub-ótimo. A rede desempenha um papel crítico no ambiente comercial. Os dados do mercado são levados ao balcão onde os comerciantes humanos estão localizados através de uma rede de alta velocidade Campus ou Metro Area. Alta disponibilidade e baixa latência, bem como alto rendimento, são as métricas mais importantes. O ambiente de negociação de alto desempenho tem a maioria de seus componentes no farm de servidores do Data Center. Para minimizar a latência, os mecanismos de negociação algorítmica precisam estar localizados na proximidade dos manipuladores de alimentação, dos motores FIX e dos sistemas de gerenciamento de pedidos. Um modelo de implantação alternativo possui os sistemas de negociação algorítmica localizados em uma troca ou um provedor de serviços com conectividade rápida para trocas múltiplas. Modelos de implantação Existem dois modelos de implantação para uma plataforma de negociação de alto desempenho. As empresas podem escolher ter uma combinação dos dois: Centro de dados da empresa comercial (Figura 2) Este é o modelo tradicional, onde uma plataforma de negociação de pleno direito é desenvolvida e mantida pela empresa com links de comunicação para todos os locais de negociação. A latência varia com a velocidade dos links e o número de lúpulos entre a empresa e os locais. Figura 2 Modelo de implantação tradicional Co-localização no local de negociação (trocas, provedores de serviços financeiros (FSP)) (Figura 3) A empresa comercial implementa sua plataforma de negociação automatizada o mais próximo possível dos locais de execução para minimizar a latência. Figura 3 Arquitetura de negociação orientada para serviços modelo de implantação hospedada Proponemos uma estrutura orientada a serviços para a construção da arquitetura comercial de próxima geração. Esta abordagem fornece uma estrutura conceitual e um caminho de implementação baseado em modularização e minimização de interdependências. Esta estrutura fornece às empresas uma metodologia para: Avaliar seu estado atual em termos de serviços Priorizar os serviços com base no seu valor para o negócio Evoluir a plataforma de negociação para o estado desejado usando uma abordagem modular A arquitetura de negociação de alto desempenho depende dos seguintes serviços, como Definido pelo quadro de arquitetura de serviços representado na Figura 4. Figura 4 Estrutura de Arquitetura de Serviços para Negociação de Alto Desempenho Serviço de Mensagens de Latência Ultra-Baixa Este serviço é fornecido pelo barramento de mensagens, que é um sistema de software que resolva o problema de conectar muitos-a - Muitas aplicações. O sistema consiste em: Um conjunto de esquemas de mensagens pré-definidos Um conjunto de mensagens de comando comuns Uma infra-estrutura de aplicativos compartilhados para enviar as mensagens aos destinatários. A infra-estrutura compartilhada pode ser baseada em um corretor de mensagens ou em um modelo de cancelamento de publicação. Os principais requisitos para o barramento de mensagens de próxima geração são (fonte 29West): menor latência possível (por exemplo, menos de 100 microssegundos) Estabilidade sob carga pesada (por exemplo, mais de 1,4 milhões de msgsec.) Controle e flexibilidade (controle de taxa e transportes configuráveis) São esforços na indústria para padronizar o ônibus de mensagens. O Advanced Message Queuing Protocol (AMQP) é um exemplo de um padrão aberto defendido por J. P. Morgan Chase e apoiado por um grupo de fornecedores, tais como Cisco, Envoy Technologies, Red Hat, TWIST Process Innovations, Iona, 29West e iMatix. Dois dos principais objetivos são fornecer um caminho mais simples para a interoperabilidade para aplicações escritas em diferentes plataformas e modularidade para que o middleware possa ser facilmente desenvolvido. Em termos muito gerais, um servidor AMQP é análogo a um servidor de E-mail com cada troca atuando como um agente de transferência de mensagens e cada fila de mensagens como caixa de correio. As ligações definem as tabelas de roteamento em cada agente de transferência. Os editores enviam mensagens para agentes de transferência individuais, que então roteiam as mensagens para as caixas de correio. Os consumidores tomam mensagens de caixas de correio, o que cria um modelo poderoso e flexível que é simples (fonte: amqp. orgtikiwikitiki-index. phppageOpenApproachWhyAMQP). Serviço de Monitoramento de Latência Os principais requisitos para este serviço são: Granularidade de milissegundos de medidas Visibilidade em tempo real sem adicionar latência ao tráfego comercial Capacidade de diferenciar latência de processamento de aplicativos de latência de trânsito de rede Capacidade de lidar com altas taxas de mensagens Fornecer uma interface programática para Negociação de aplicativos para receber dados de latência, permitindo que os mecanismos de negociação algorítmica se adaptem às condições de mudança. Correla eventos de rede com eventos de aplicativos para fins de solução de problemas. A latência pode ser definida como o intervalo de tempo entre quando uma ordem comercial é enviada e quando a mesma ordem é reconhecida e agendada Sobre a parte receptora. Abordar o problema de latência é um problema complexo, que requer uma abordagem holística que identifique todas as fontes de latência e aplique diferentes tecnologias em diferentes camadas do sistema. A Figura 5 mostra a variedade de componentes que podem introduzir latência em cada camada da pilha OSI. Ele também mapeia cada fonte de latência com uma solução possível e uma solução de monitoramento. Esta abordagem em camadas pode dar às empresas uma maneira mais estruturada de atacar a questão da latência, pelo qual cada componente pode ser considerado como um serviço e tratado de forma consistente em toda a empresa. Manter uma medida precisa do estado dinâmico desse intervalo de tempo em rotas alternativas e destinos pode ser de grande ajuda nas decisões táticas de negociação. A capacidade de identificar a localização exata dos atrasos, seja na rede de ponta dos clientes, no centro central de processamento ou no nível de aplicação da transação, determina significativamente a capacidade dos prestadores de serviços de atender aos acordos de nível de serviço comercial (SLA). Para os formulários do lado da compra e do lado da venda, bem como para os comerciantes de dados de mercado, a rápida identificação e remoção de estrangulamentos se traduz diretamente em oportunidades comerciais e receitas melhoradas. Figura 5 Arquitetura de gerenciamento de latência Ferramentas de monitoramento de baixa latência da Cisco As ferramentas tradicionais de monitoramento de rede operam com granularidade de minutos ou segundos. As plataformas de negociação de próxima geração, especialmente as que oferecem suporte à negociação algorítmica, exigem latências inferiores a 5 ms e níveis extremamente baixos de perda de pacotes. Em uma LAN Gigabit, um microburst de 100 ms pode causar perda de 10.000 transtornos ou atraso excessivo. A Cisco oferece aos seus clientes uma escolha de ferramentas para medir a latência em um ambiente comercial: Gerenciador de Qualidade de Banda Larga (BQM) (OEM da Corvil) Gerenciador de Qualidade de Banda Larga (BQM) 4.0 Um produto de gerenciamento de desempenho de aplicativos de rede de próxima geração que permite aos clientes monitorar e provisionar sua rede para níveis controlados de latência e desempenho de perdas. Embora o BQM não seja exclusivamente alvo de redes comerciais, sua visibilidade por microsecondes combinada com características de provisionamento de banda larga inteligentes o torna ideal para esses ambientes exigentes. O Cisco BQM 4.0 implementa um amplo conjunto de tecnologias de análise de tráfego e de medição de tráfego patenteadas e pendentes de patente que proporcionam ao usuário uma visibilidade e uma compreensão sem precedentes de como otimizar a rede para o máximo desempenho da aplicação. O Cisco BQM agora é suportado na família de produtos do Cisco Application Deployment Engine (ADE). A família de produtos Cisco ADE é a plataforma de escolha para aplicativos de gerenciamento de rede da Cisco. Benefícios da BQM A micro-visibilidade do Cisco BQM é a capacidade de detectar, medir e analisar eventos de transição de latência, jitter e perda de indução para níveis microscópios de granularidade por resolução de pacotes. Isso permite que o Cisco BQM detecte e determine o impacto dos eventos de trânsito na latência, jitter e perda da rede. Critical para ambientes de negociação é que o BQM pode suportar medições de latência, perda e jitter de uma via para o tráfego TCP e UDP (multicast). Isso significa que ele informa perfeitamente tanto para o tráfego comercial quanto para os feeds de dados do mercado. O BQM permite ao usuário especificar um conjunto abrangente de limiares (contra atividade de microburst, latência, perda, jitter, utilização, etc.) em todas as interfaces. BQM, em seguida, opera uma captura de pacote de rolagem de fundo. Sempre que ocorre uma violação de limite ou outro evento de degradação de desempenho potencial, ele desencadeia o Cisco BQM para armazenar a captura de pacotes no disco para análise posterior. Isso permite ao usuário examinar detalhadamente o tráfego de aplicativos que foi afetado pela degradação do desempenho (quotthe victimsquot) e o tráfego que causou a degradação do desempenho (quotthe culpritsquot). Isso pode reduzir significativamente o tempo gasto no diagnóstico e na resolução de problemas de desempenho da rede. O BQM também é capaz de fornecer recomendações detalhadas de aprovisionamento de políticas de largura de banda e qualidade de serviço (QoS), que o usuário pode aplicar diretamente para alcançar o desempenho da rede desejado. Medidas BQM ilustradas Para entender a diferença entre algumas das técnicas de medição mais convencionais e a visibilidade fornecida pela BQM, podemos observar alguns gráficos de comparação. No primeiro conjunto de gráficos (Figura 6 e Figura 7), vemos a diferença entre a latência medida pelo Monitor de Qualidade de Rede Passiva do BQM (PNQM) e a latência medida pela injeção de pacotes de ping a cada 1 segundo no fluxo de tráfego. Na Figura 6., vemos a latência reportada por pacotes de ping ICMP de 1 segundo para tráfego de rede real (é dividido por 2 para dar uma estimativa para o atraso de ida). Ele mostra o atraso confortavelmente abaixo de cerca de 5ms por quase todo o tempo. Figura 6 Latência relatada por pacotes de ping ICMP de 1 segundo para tráfego de rede real Na Figura 7. vemos a latência relatada pelo PNQM pelo mesmo tráfego ao mesmo tempo. Aqui vemos que ao medir a latência unidirecional dos pacotes de aplicativos reais, obtemos uma imagem radicalmente diferente. Aqui, a latência está pairando em torno de 20 ms, com rajadas ocasionais muito maiores. A explicação é que, como o ping está enviando pacotes apenas a cada segundo, está perdendo a maior parte da latência do tráfego do aplicativo. Na verdade, os resultados do ping normalmente indicam apenas um atraso de propagação de ida e volta em vez de uma latência de aplicação realista em toda a rede. Figura 7 Latência relatada pelo PNQM para o tráfego de rede real No segundo exemplo (Figura 8), vemos a diferença nos níveis de carga ou saturação de link relatados entre uma visão média de 5 minutos e uma visão de microburst de 5 ms (BQM pode informar sobre microbursos para baixo Para uma precisão de 10-100 nanosegundos). A linha verde mostra a utilização média em médias de 5 minutos para ser baixa, talvez até 5 Mbits. O gráfico azul escuro mostra a atividade de microburst de 5ms que atinge entre 75 Mbits e 100 Mbits, a velocidade da LAN efetivamente. O BQM mostra esse nível de granularidade para todas as aplicações e também fornece regras de provisionamento claras para permitir ao usuário controlar ou neutralizar essas microbursas. Figura 8 Diferença na carga do link relatado entre uma visão média de 5 minutos e uma implantação BQM de Microburst de 5 ms na rede de negociação A Figura 9 mostra uma implantação BQM típica em uma rede comercial. Figura 9 Implantação típica de BQM em uma rede de negociação O BQM pode então ser usado para responder a esses tipos de perguntas: Algum dos meus links principais Gigabit LAN está saturado por mais de milissegundos X Isso está causando perda Quais links mais se beneficiarão de uma atualização para o Etherchannel ou 10 velocidades de Gigabit O tráfego de aplicativos está causando a saturação de meus links de 1 Gigabit Algum dos dados do mercado que experimentam perda de ponta a ponta Quanto latencia adicional o centro de dados de failover experimenta Este link está dimensionado corretamente para lidar com microbursts Meus comerciantes Obtendo baixas atualizações de latência da camada de distribuição de dados do mercado Eles estão vendo atrasos maiores que X milissegundos. Ser capaz de responder a essas perguntas de forma simples e efetivamente economiza tempo e dinheiro na execução da rede comercial. O BQM é uma ferramenta essencial para obter visibilidade nos dados de mercado e nos ambientes de negociação. Fornece medições granulométricas de latência de ponta a ponta em infraestruturas complexas que experimentam movimentos de dados de alto volume. Detectar eficazmente microbursts em níveis de sub-milissegundos e receber análises de especialistas em um evento específico é inestimável para os arquitetos do comércio. Recomendações de aprovisionamento de largura de banda inteligente, como dimensionamento e análise do que é necessário, proporcionam maior agilidade para responder a condições de mercado voláteis. À medida que a explosão do comércio algorítmico e o aumento das taxas de mensagens continuam, o BQM, combinado com sua ferramenta QoS, fornece a capacidade de implementar políticas de QoS que podem proteger aplicativos comerciais importantes. Solução de monitoramento de latência do Cisco Financial Services Cisco e Trading Metrics colaboraram em soluções de monitoramento de latência para fluxo de pedidos FIX e monitoramento de dados de mercado. A tecnologia Cisco AON é a base para uma nova classe de produtos e soluções integradas na rede que ajudam a mesclar redes inteligentes com infra-estrutura de aplicativos, com base em arquiteturas orientadas para serviços ou tradicionais. A Trading Metrics é um fornecedor líder de software de análise para infra-estrutura de rede e aplicativos de monitoramento de latência de aplicativos (trademetrics). A Solução de Monitoramento de Latência de Serviços Financeiros (FSMS) da Cisco AON correlacionou dois tipos de eventos no ponto de observação: Eventos de rede correlacionados diretamente com a manipulação de mensagens de aplicativos coincidentes. Fluxo de ordem comercial e eventos de atualização de mercado correspondentes Usando selos de tempo afirmaram no ponto de captura no A análise em rede, em tempo real, desses fluxos de dados correlacionados permite a identificação precisa dos pontos de estrangulamento em toda a infra-estrutura enquanto um comércio está sendo executado ou os dados do mercado estão sendo distribuídos. Ao monitorar e medir a latência no início do ciclo, as empresas financeiras podem tomar melhores decisões sobre qual serviço de rede e qual intermediário, mercado ou contraparte selecionar para rotear ordens comerciais. Do mesmo modo, esse conhecimento permite um acesso mais simplificado aos dados de mercado atualizados (cotações de ações, notícias econômicas, etc.), que é uma base importante para iniciar, retirar ou buscar oportunidades de mercado. Os componentes da solução são: hardware AON em três fatores de forma: módulo de rede AON para roteadores Cisco 2600280037003800 AON Blade para a série Cisco Catalyst 6500 AON 8340 Appliance Trading Metrics O software MampA 2.0, que fornece o aplicativo de monitoramento e alerta, exibe gráficos de latência em Um painel, e emite alertas quando ocorrem desacelerações (trademetricsTMbrochure. pdf). Figura 10 Monitoramento de latência FIX baseado em AON Cisco IP SLA O Cisco IP SLA é uma ferramenta de gerenciamento de rede incorporada no Cisco IOS que permite roteadores e switches para gerar fluxos de tráfego sintéticos que podem ser medidos por latência, jitter, perda de pacotes e outros critérios (ciscogoipsla ). Dois conceitos-chave são a fonte do tráfego gerado e do alvo. Ambos executam um quotresponder IP SLA, que tem a responsabilidade de registrar o tráfego de controle de tempo antes de ser obtido e retornado pelo alvo (para uma medida de ida e volta). Diversos tipos de tráfego podem ser obtidos dentro do IP SLA e visam métricas diferentes e direcionam diferentes serviços e aplicativos. A operação de jitter UDP é usada para medir o atraso de ida e volta e as variações do relatório. Como o tráfego é marcado com tempo em dispositivos de envio e destino usando a capacidade de resposta, o atraso de ida e volta é caracterizado como o delta entre os dois timestamps. Um novo recurso foi introduzido no IOS 12.3 (14) T, IP SLA Sub Millisecond Reporting, que permite que os marcadores de tempo sejam exibidos com uma resolução em microssegundos, proporcionando assim um nível de granularidade não disponível anteriormente. Este novo recurso tornou IP SLA relevante para redes de campus onde a latência da rede geralmente está na faixa de 300-800 microssegundos e a capacidade de detectar tendências e espinhas (tendências breves) com base em balcões de granularidade com microssegundos é um requisito para os clientes envolvidos no tempo - ambientes de negociação eletrônica sensíveis. Como resultado, o IP SLA agora está sendo considerado por números significativos de organizações financeiras, pois todos eles enfrentam os requisitos para: Relatar a latência da linha de base para seus usuários. Tendência da latência da linha de base ao longo do tempo. Responda rapidamente às explosões de tráfego que causam alterações na latência relatada Sub - O relatório de milissegundos é necessário para esses clientes, uma vez que muitos campus e backbones estão atualmente entregando em um segundo de latência em vários lúpulos alternativos. Os ambientes de negociação eletrônica geralmente funcionaram para eliminar ou minimizar todas as áreas de latência de dispositivos e redes para fornecer uma rápida realização de pedidos para o negócio. Informar que os tempos de resposta da rede são menores a um milissegundo que já não é suficiente. A granularidade das medições de latência relatadas em um segmento de rede ou backbone precisa ser mais próxima de 300-800 micro-segundos com um grau de resolução de 100 segundos de igrave. O IP SLA recentemente adicionou suporte para fluxos de teste de multicast IP, que podem medir latência de dados de mercado. Uma topologia de rede típica é mostrada na Figura 11 com os roteadores de sombra IP SLA, fontes e respondedores. Figura 11 IP SLA Deployment Computing Services Os serviços de computação cobrem uma ampla gama de tecnologias com o objetivo de eliminar a memória e os estrangulamentos da CPU criados pelo processamento de pacotes de rede. As aplicações de comércio consomem altos volumes de dados de mercado e os servidores precisam dedicar recursos ao processamento de tráfego de rede em vez de processamento de aplicativos. Processamento de transporte Em altas velocidades, o processamento de pacotes de rede pode consumir uma quantidade significativa de ciclos e memória do CPU do servidor. Uma regra de padrão estabelecida indica que 1Gbps de largura de banda de rede requer 1 GHz de capacidade do processador (fonte de papel branco da Intel sobre aceleração IO inteltechnologyioacceleration306517.pdf). Copiagem intermédia de buffer Em uma implementação de pilha de rede convencional, os dados precisam ser copiados pela CPU entre buffers de rede e buffers de aplicativos. Esta sobrecarga é agravada pelo fato de que as velocidades da memória não acompanharam os aumentos nas velocidades da CPU. Por exemplo, processadores como o Intel Xeon estão se aproximando de 4 GHz, enquanto os chips de RAM passam por 400MHz (para a memória DDR 3200) (fonte Intel Inteltechnologyioacceleration306517.pdf). Comutação de contexto Cada vez que um pacote individual precisa ser processado, a CPU executa uma mudança de contexto do contexto do aplicativo para o contexto de tráfego da rede. Esta sobrecarga poderia ser reduzida se o interruptor ocorresse apenas quando o buffer de aplicação completo estiver completo. Figura 12 Fontes de Sobrecarga nos Servidores do Centro de Dados TCP Offload Engine (TOE) Desloca os ciclos do processador de transporte para a NIC. Move as cópias do buffer de pilha de protocolos TCPIP da memória do sistema para a memória NIC. Remote Direct Memory Access (RDMA) Permite que um adaptador de rede transfira dados diretamente do aplicativo para o aplicativo sem envolver o sistema operacional. Elimina cópias intermédias e de buffer de aplicativos (consumo de largura de banda de memória). Kernel bypass Acesso direto ao nível do usuário ao hardware. Diminui drasticamente os switches do contexto do aplicativo. Figura 13 RDMA e Kernel Bypass InfiniBand é um link de comunicação serial bidirecional ponto-a-ponto (tecido comutado) que implementa RDMA, entre outros recursos. A Cisco oferece um switch InfiniBand, o Server Fabric Switch (SFS): ciscoapplicationpdfenusguestnetsolns500c643cdccont0900aecd804c35cb. pdf. Figura 14 Aplicações típicas de implantação do SFS Os aplicativos de negociação se beneficiam da redução da latência e da variabilidade de latência, como comprovado por um teste realizado com o Cisco SFS e Wombat Feed Handlers por Stac Research: Application Virtualization Service Desacoplando o aplicativo do SO subjacente e do hardware do servidor Permite que eles funcionem como serviços de rede. Um aplicativo pode ser executado em paralelo em vários servidores, ou vários aplicativos podem ser executados no mesmo servidor, como dita a melhor alocação de recursos. Essa dissociação permite um melhor balanceamento de carga e recuperação de desastres para estratégias de continuidade de negócios. O processo de reatribuição de recursos de computação a um aplicativo é dinâmico. Usando um sistema de virtualização de aplicativos como o Data Synapses GridServer, os aplicativos podem migrar, usando políticas pré-configuradas, para servidores subutilizados em um processo de fornecimento-correspondência-demanda (networkworldsupp2005ndc1022105virtual. htmlpage2). Existem muitas vantagens comerciais para as empresas financeiras que adotam a virtualização de aplicativos: um tempo mais rápido para o mercado de novos produtos e serviços. Integração mais rápida das empresas após a operação de fusão e aquisição. Maior disponibilidade de aplicativos. Maior distribuição de carga de trabalho, o que cria mais espaço para processar picos no volume comercial. Eficiência e controle Redução na complexidade de TI Atualmente, a virtualização de aplicativos não é usada no front-office de negociação. Um caso de uso é modelagem de risco, como simulações de Monte Carlo. À medida que a tecnologia evolui, é concebível que algumas plataformas de negociação o adotem. Serviço de Virtualização de Dados Para efetivamente compartilhar recursos em aplicativos empresariais distribuídos, as empresas devem ser capazes de aproveitar dados em várias fontes em tempo real, garantindo a integridade dos dados. Com soluções de fornecedores de software de virtualização de dados, como Gemstone ou Tangosol (agora Oracle), as empresas financeiras podem acessar fontes heterogêneas de dados como uma única imagem de sistema que permite a conectividade entre os processos de negócios e o acesso irrestrito às aplicações ao armazenamento em cache distribuído. O resultado líquido é que todos os usuários têm acesso instantâneo a esses recursos de dados em uma rede distribuída (gridtoday030210101061.html). Isso é chamado de grade de dados e é o primeiro passo no processo de criação do que o Gartner chama de Processamento de Transações Extreme (XTP) (gartnerDisplayDocumentrefgsearchampid500947). Tecnologias como a virtualização de dados e aplicativos permitem às empresas financeiras realizar análises complexas em tempo real, aplicativos orientados a eventos e alocação dinâmica de recursos. One example of data virtualization in action is a global order book application. An order book is the repository of active orders that is published by the exchange or other market makers. A global order book aggregates orders from around the world from markets that operate independently. The biggest challenge for the application is scalability over WAN connectivity because it has to maintain state. Todays data grids are localized in data centers connected by Metro Area Networks (MAN). This is mainly because the applications themselves have limitsthey have been developed without the WAN in mind. Figure 15 GemStone GemFire Distributed Caching Before data virtualization, applications used database clustering for failover and scalability. This solution is limited by the performance of the underlying database. Failover is slower because the data is committed to disc. With data grids, the data which is part of the active state is cached in memory, which reduces drastically the failover time. Scaling the data grid means just adding more distributed resources, providing a more deterministic performance compared to a database cluster. Multicast Service Market data delivery is a perfect example of an application that needs to deliver the same data stream to hundreds and potentially thousands of end users. Market data services have been implemented with TCP or UDP broadcast as the network layer, but those implementations have limited scalability. Using TCP requires a separate socket and sliding window on the server for each recipient. UDP broadcast requires a separate copy of the stream for each destination subnet. Both of these methods exhaust the resources of the servers and the network. The server side must transmit and service each of the streams individually, which requires larger and larger server farms. On the network side, the required bandwidth for the application increases in a linear fashion. For example, to send a 1 Mbps stream to 1000recipients using TCP requires 1 Gbps of bandwidth. IP multicast is the only way to scale market data delivery. To deliver a 1 Mbps stream to 1000 recipients, IP multicast would require 1 Mbps. The stream can be delivered by as few as two serversone primary and one backup for redundancy. There are two main phases of market data delivery to the end user. In the first phase, the data stream must be brought from the exchange into the brokerages network. Typically the feeds are terminated in a data center on the customer premise. The feeds are then processed by a feed handler, which may normalize the data stream into a common format and then republish into the application messaging servers in the data center. The second phase involves injecting the data stream into the application messaging bus which feeds the core infrastructure of the trading applications. The large brokerage houses have thousands of applications that use the market data streams for various purposes, such as live trades, long term trending, arbitrage, etc. Many of these applications listen to the feeds and then republish their own analytical and derivative information. For example, a brokerage may compare the prices of CSCO to the option prices of CSCO on another exchange and then publish ratings which a different application may monitor to determine how much they are out of synchronization. Figure 16 Market Data Distribution Players The delivery of these data streams is typically over a reliable multicast transport protocol, traditionally Tibco Rendezvous. Tibco RV operates in a publish and subscribe environment. Each financial instrument is given a subject name, such as CSCO. last. Each application server can request the individual instruments of interest by their subject name and receive just a that subset of the information. This is called subject-based forwarding or filtering. Subject-based filtering is patented by Tibco. A distinction should be made between the first and second phases of market data delivery. The delivery of market data from the exchange to the brokerage is mostly a one-to-many application. The only exception to the unidirectional nature of market data may be retransmission requests, which are usually sent using unicast. The trading applications, however, are definitely many-to-many applications and may interact with the exchanges to place orders. Figure 17 Market Data Architecture Design Issues Number of GroupsChannels to Use Many application developers consider using thousand of multicast groups to give them the ability to divide up products or instruments into small buckets. Normally these applications send many small messages as part of their information bus. Usually several messages are sent in each packet that are received by many users. Sending fewer messages in each packet increases the overhead necessary for each message. In the extreme case, sending only one message in each packet quickly reaches the point of diminishing returnsthere is more overhead sent than actual data. Application developers must find a reasonable compromise between the number of groups and breaking up their products into logical buckets. Consider, for example, the Nasdaq Quotation Dissemination Service (NQDS). The instruments are broken up alphabetically: This approach allows for straight forward networkapplication management, but does not necessarily allow for optimized bandwidth utilization for most users. A user of NQDS that is interested in technology stocks, and would like to subscribe to just CSCO and INTL, would have to pull down all the data for the first two groups of NQDS. Understanding the way users pull down the data and then organize it into appropriate logical groups optimizes the bandwidth for each user. In many market data applications, optimizing the data organization would be of limited value. Typically customers bring in all data into a few machines and filter the instruments. Using more groups is just more overhead for the stack and does not help the customers conserve bandwidth. Another approach might be to keep the groups down to a minimum level and use UDP port numbers to further differentiate if necessary. The other extreme would be to use just one multicast group for the entire application and then have the end user filter the data. In some situations this may be sufficient. Intermittent Sources A common issue with market data applications are servers that send data to a multicast group and then go silent for more than 3.5 minutes. These intermittent sources may cause trashing of state on the network and can introduce packet loss during the window of time when soft state and then hardware shorts are being created. PIM-Bidir or PIM-SSM The first and best solution for intermittent sources is to use PIM-Bidir for many-to-many applications and PIM-SSM for one-to-many applications. Both of these optimizations of the PIM protocol do not have any data-driven events in creating forwarding state. That means that as long as the receivers are subscribed to the streams, the network has the forwarding state created in the hardware switching path. Intermittent sources are not an issue with PIM-Bidir and PIM-SSM. Null Packets In PIM-SM environments a common method to make sure forwarding state is created is to send a burst of null packets to the multicast group before the actual data stream. The application must efficiently ignore these null data packets to ensure it does not affect performance. The sources must only send the burst of packets if they have been silent for more than 3 minutes. A good practice is to send the burst if the source is silent for more than a minute. Many financials send out an initial burst of traffic in the morning and then all well-behaved sources do not have problems. Periodic Keepalives or Heartbeats An alternative approach for PIM-SM environments is for sources to send periodic heartbeat messages to the multicast groups. This is a similar approach to the null packets, but the packets can be sent on a regular timer so that the forwarding state never expires. S, G Expiry Timer Finally, Cisco has made a modification to the operation of the S, G expiry timer in IOS. There is now a CLI knob to allow the state for a S, G to stay alive for hours without any traffic being sent. The (S, G) expiry timer is configurable. This approach should be considered a workaround until PIM-Bidir or PIM-SSM is deployed or the application is fixed. RTCP Feedback A common issue with real time voice and video applications that use RTP is the use of RTCP feedback traffic. Unnecessary use of the feedback option can create excessive multicast state in the network. If the RTCP traffic is not required by the application it should be avoided. Fast Producers and Slow Consumers Today many servers providing market data are attached at Gigabit speeds, while the receivers are attached at different speeds, usually 100Mbps. This creates the potential for receivers to drop packets and request re-transmissions, which creates more traffic that the slowest consumers cannot handle, continuing the vicious circle. The solution needs to be some type of access control in the application that limits the amount of data that one host can request. QoS and other network functions can mitigate the problem, but ultimately the subscriptions need to be managed in the application. Tibco Heartbeats TibcoRV has had the ability to use IP multicast for the heartbeat between the TICs for many years. However, there are some brokerage houses that are still using very old versions of TibcoRV that use UDP broadcast support for the resiliency. This limitation is often cited as a reason to maintain a Layer 2 infrastructure between TICs located in different data centers. These older versions of TibcoRV should be phased out in favor of the IP multicast supported versions. Multicast Forwarding Options PIM Sparse Mode The standard IP multicast forwarding protocol used today for market data delivery is PIM Sparse Mode. It is supported on all Cisco routers and switches and is well understood. PIM-SM can be used in all the network components from the exchange, FSP, and brokerage. There are, however, some long-standing issues and unnecessary complexity associated with a PIM-SM deployment that could be avoided by using PIM-Bidir and PIM-SSM. These are covered in the next sections. The main components of the PIM-SM implementation are: PIM Sparse Mode v2 Shared Tree (spt-threshold infinity) A design option in the brokerage or in the exchange. January 2017 If you are going to make one financial resolution this New Year, make it this: Ignore the pundits and talking heads. 2016 gave us plenty of excuses not to be invested: Faltering prices in January, slowing growth in China, negative interest rates, the U. K.s Brexit vote and Donald Trumps surprise winndashto name a few. The Dow hit no fewer than 26 new highs in 2016ndasheach one an opportunity to quotsell at the top. quot Yet investors who got caught up in the headlines and sold out missed the sizable gains the U. S. markets finished out 2016 with. In this months issue, I recap 2016 and give my Outlook for the next year. As usual, pundits (including my 2017 Roubini Award winner, whose name I announce in the issue) got plenty wrong in 2016, and as usual, I dont expect them to fess up like I do in my annual Scorecard . also featured in this issue. As I say every year, tune out the pundits and predictors Your ears and your portfolio will thank you. And especially for those approaching retirement, your portfolio will thank you double if you max out your 2016 retirement account contributionsndashtheres still time. This months issue puts all of the deadlines and contribution limits right at your fingertips, along with a comprehensive list of Vanguards December special distributions and (of course) the name of my 2017 Hot Hands fund. Read More December 2016 December 1, 2016 The consensus in the 2016 presidential election was that Clinton would win, and if Trump somehow beat her, the markets would tumble. Wrong on both counts. I often say market timing is impossible because you have to be right twicemdashknowing both when to sell and when to buymdashbut there is another wrinkle to consider: Even if you predict an events outcome correctly (like who will win an election), you also have to know how markets will react. Im not about to abandon my simple principles of staying diversified and focusing on the long term, which I follow by partnering with the best managers at rock-bottom prices and spending time in the marketsmdashthey have served us well over the past quarter century. In this months issue, we try to prepare for the future by examining the past. First, I review our time-tested October Hot Hands strategymdashwhat it is, how its fared since I started tracking it 24 years ago, and why I chose October as the basis for this mechanical, long-term momentum-based strategy. Next, I take the claims of Jack Bogle and Vanguards Chris Alwine, that yields on bond funds can predict future returns, and put them to the test on the real data from November 1993 to October 2016mdashand show you what that could mean for returns through 2026. I also examine two Vanguard funds at important milestone anniversaries. And for subscribers who are still with us after all these years, I provide a roadmap to downshift the risk in your portfolio and transition from one of our more volatile portfolios to a less risky option. Read More November 2016 November 1, 2016 October lived up to its reputation as the worst month to invest in stocks (undeserved, since September has been the worst month, on average), with particular weakness in health care, thanks to fears over biotech and pharma companies bottom lines. I cant say it enoughmdashthese are buying opportunities, not reasons to sell. I believe any dollar you add to the pressured sector now, particularly to Health Care . will yield robust returns over the next three to five years. But despite strong fundamentals in the economy and the markets, 500 Index s three-year return number fell into the single digits as of the end of October. Will some investors see that as signaling a negative turn Sure. Do I see it that way Not hardly. In this months issue, in addition to the name of the new October Hot Hands fund, youll find a review of the slice of the stock market that I consider to be in the sweet spot for growthmdashmid-caps. Jeff and I crunch the numbers on just how much they outperform relative to large - and small-cap stocks, and break down all of Vanguards funds (index funds and actively managed) that invest in that space. Later on in the issue, Ill tell you what to expect in the next presidential term, but why I avoid making predictions when it comes to the markets. And finally, while last year was a bust for the strategy, Ill show you the data on why tech stocks tend to shine in the four-month Tech Winter periodmdashand why it pays to go active to play the strategy. Read More October 2016 Forget all the excitement around the first presidential debate or OPECs 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 wont they prospect of a Fed interest-rate hike. They didnt, 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. Im not going out on a limb to predict that volatility will continuemdashthe 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 is par for the course when it comes to investing in the wealth-building engine that is the stock market. In speaking of wealth-building engines, Jeff and I explore large-cap growth funds in this months fund focus. A large cap-growth fund should drive portfolio returns for years to come, and we will tell you which team is among the best in the business. Meanwhile, Health Care has hit a rough patch, but stick with the fund. We have an exclusive interview this month with portfolio manager Jean Hynes, who is concentrating on her highest conviction picks. Finally, Tax-Exempt Bond Index has proven to be a worthy competitor to Intermediate-Term Tax-Exempt since its inception just over one year agomdashfind out the best way to buy into index fund if you are interested. Read More September 2016 September 1, 2016 August is over, and with it ends one of the most mellow summer months that long-term investors like us have ever experienced. Itrsquos a safe bet that as traders return from the beach, wersquoll see volatility pick up. If volatility is coming, and with markets now below the highs hit mid-month, should we be selling, having already missed the top In this months issue, Jeff and I will show you why attempting to time the market by selling out when the indexes hit a new all-time high is a bad idea. And speaking of bad ideas, chasing Precious Metals amp Mining s 70.2 year to date return is another one. If you want an aggressive fund, there are much better and less risky options at Vanguard, and weve got the full rundown on them in this months Funds Focus. But while in some cases, indexing might be the way to go, dont assume that ETFs are superior to the traditional mutual fund structure. Just because something is new doesnt mean its bettermdashand that goes for Vanguards Alternative Strategies fund as well. Read More August 2016 With just two days left in the month, Vanguard slammed the doors shut on Dividend Growth . run by Don Kilbride. But what no one seems to have noticed is what Vanguard didnt do: Vanguard didnt add a second or third manager to keep the fund open. Following on the changes at Capital Value and International Growth . this is another move in what I think is the right direction of avoiding the multimanager messes theyve gotten themselves into at funds like Explorer and Morgan Growth . Also, if you only read the press release, rather than the prospectus, you probably missed the fact that Vanguard left itself the option of opening new accounts in Dividend Growth through its robo-advisory system, Vanguard Personal Advisor Services. Theres an exception for quotinvestors who are added and invest in the Fund only through technology-driven model portfolios. quot In this months issue, Jeff and I will tell you what your next best option is now that Dividend Growth is closed, plus (as promised) what to make of Vanguards various international stock funds. Meanwhile, Vanguard raised operating expenses on its state tax-exempt money market funds during the funds last semiannual operating period (theyll tell you they simply reversed fee waivers). My question is, if Vanguard was able to operate its funds at the fee-waived levels that were in place for the past few years, why couldnt they keep doing it And thats not the only area where Vanguards not being forthright with shareholders, claiming great since-inception performance for MidCap Growth . which has actually underperformed during its current managers tenure. In any case, while were busting myths, lets also take a look at claims that the markets are quotmore volatile, quot the future is quotmore uncertainquot and that a flattening yield curve leads to recession. Read More Invest for tomorrow, invest for the next year, or invest for the next decade I think a lot of investors were pondering those questions during the final week of June as stock markets first crumbled under the weight of the result of the Brexit vote on June 23 and then staged rebounds. Ultimately, as negative as the initial reporting was, by the end of June, Londons FTSE 100 index was up 4.4 for the month and actually 2.6 higher than where it stood prior to the Brexit vote. In this months issue, Jeff talks about the foreign markets and why you should continue to invest overseas in the first of our two-part focus on Vanguards global offerings. That said, more quotdiversifiedquot isnt always better, as Vanguard may have finally realized when it fired one of three management teams on Explorer Value in early June. Even more surprising, in the current semiannual reports for Windsor and Windsor II . three of the total seven managers actually disclose their underperformance. Is Vanguard seeing the disclosure light, or was this a mistake Whatever the case, you know that the disclosure requirements for how mutual fund board members invest in the funds they oversee are lacking. Still, Ive done my best to estimate the minimum Vanguards directors are doing, and its not pretty. And while were shedding some light on things, lets take a look at Vanguards Partnership Plan . whose dividend has grown more than 54 times since inception, while the value of one share of 500 Index has only grown 24 times including reinvested dividends. Still think Vanguard is a quotnon-profitquot Read More Last month was a roller-coaster of ups and downs catalyzed by guessing about the Feds next move. In the end, the bulls won, though not without plenty of negative sentiment. But why worry The overwhelming rationale for another rate hike will be that the U. S. economy is functioning properly, expanding well, and is showing some signs of a steady increase in inflationndashall positives for you, me, and stock prices. In any case, all the focus on whether the stock market indexes are making new highs or not ignores the fact that more than 90 of the time, stocks are going to be below their highs, as well show you in this months issue. And if you think rebalancing is going to minimize your risk or improve your returns, think again. In spite of what Vanguard claims, the data shows that neither rebalancing nor adding more managers to a fund is likely to help investors. And to knock down another myth, ETFs arent necessarily more tax-efficient than traditional index funds, as youll see in our follow-up to last months story on tax efficiency. But dont expect Vanguard to tell you any of that. Instead, pop open the issue and check out the rest of the 10 Things Vanguard Wont Tell You . Read More After a rough start to 2016, a relative calm seems to have settled over Wall Street. Volatility is down stocks are up and high yield is back in favor. Meanwhile, the first-quarter GDP report raised investor anxiety, showing that economic growth was extremely light for the third year in a row, at 0.5 growth. Would I like to see stronger economic growth Absolutely. Do I think the current slowdown warrants panic Not at all. In any case, if you missed last weeks Hotline . we made a trade in two of our Model Portfolios . Jeff and I have a recap of the trade and a full explanation of our reasoning for you in the issue. Of course, some of you may be sitting on some hefty long-term gains, so please feel free to check with your tax adviser about the tax implications. But when it comes to taxes, please dont make the mistake of making tax efficiency your primary goal in investing. What really matters is after-tax returns. Of course, thats just one of several things Vanguard probably wont tell youndashthe advice youll get from them is generally dumbed down to the point of being useless. More on both of those topics, plus a reader question about the equity allocations in our Model Portfolios . in the issue. Read More April 2016 The common quotwisdomquot of 2016 has been that the economy is headed for recession, the bull market in stocks is ready for a tumble, oil will remain under 30 per barrel, and wages are stagnant. But since mid-February, many pundits have reversed course, as stocks have rebounded to within 3.5 of their all-time highs, oil has pushed into the 40 range, and our slow-growth, not no-growth economy has continued to move ahead. In this months issue, Ill tell you why one of the best things you can do for your portfolio is to go on a media diet. Whether its predictions of gloom and doom from people like the discredited author of Rich Dad Poor Dad or Vanguards latest press initiative claiming expense ratios have been falling, you have to take everything you read in the media with a grain of salt. And by the way, the same goes for everything you hear about annuities, as Jeff explains in detail in this months Funds Focus. What about the four new funds Vanguard launched recently Well, I cant really get behind three of them, but one should rival index behemoth Total Bond Market Index. Read More March 2016 Note: Due to a hang-up in our mail production process this month, your mailed issue may be delayed by up to 3 days. After Januarys decline, February continued to grind investors downndashfor a while anyways. By months end, the Dow squeaked out a 0.3 gain, while the SampP index dropped 0.4. Total Stock Market Index . which had been down as much as 11.3 for the year, ended the month off 5.7, cutting that loss in half. Did you take advantage of the opportunities afforded by this manic market Did you trim from some of your best performers and add to the laggards If youre like most investors, you didnt, because its hard to sell your winners and buy your losers. But trades like that are exactly what long-term investors do when the markets hand them a gimme. In this months issue, Jeff and I answer your questions about recent laggards like Health Care and High-Yield Corporate . plus the purported correlation between stocks and oil that has been making the rounds in the media lately. Weve also got updates on Don Kilbrides performance at Dividend Growth . upcoming quarterly and supplemental distributions, and the international dividend funds Vanguard has been planning to launch. In any case, while I wouldnt recommend using Managed Payout to do it, if you havent yet funded your Roth IRA for 2015 or helped your children or grandchildren open their own, you still have until April 15 to do so. Jeff and I have some tips on how to go about it and what funds to start with in the issue. Read More February 2016 February 1, 2016 An old market chestnut says, quotAs goes January, so goes the rest of the year. quot Theres just one problem: While the so-called January Barometer has a 72 chance of being correct, simply betting that the market will go up gives you an 82 chance of being right. So lets acknowledge that declines like those we saw this past month are a natural part of investing. While the SampP 500 ended the month down 8.9 from its May 2015 high, those losses are behind us, and selling now wont change that. In this months issue, Jeff DeMaso and I discuss why youre better off ignoring Wall Street myths like the January Barometer, not to mention the regular rebalancing advice that Vanguard and the media love so much. While it may sound simple in theory, the data shows its a lot more complicated than you might think, and simply going with the flow without rebalancing isnt a bad idea. And speaking of going with the flow, weve got the full story on our momentum-driven calendar-year Hot Hands strategy. This years pick is the first foreign fund to make the cut since a four-year streak from 2003 through 2006. Are we setting up for a repeat Read More January 2017 If you are going to make one financial resolution this New Year, make it this: Ignore the pundits and talking heads. 2016 gave us plenty of excuses not to be invested: Faltering prices in January, slowing growth in China, negative interest rates, the U. K.s Brexit vote and Donald Trumps surprise winndashto name a few. The Dow hit no fewer than 26 new highs in 2016ndasheach one an opportunity to quotsell at the top. quot Yet investors who got caught up in the headlines and sold out missed the sizable gains the U. S. markets finished out 2016 with. In this months issue, I recap 2016 and give my Outlook for the next year. As usual, pundits (including my 2017 Roubini Award winner, whose name I announce in the issue) got plenty wrong in 2016, and as usual, I dont expect them to fess up like I do in my annual Scorecard . also featured in this issue. As I say every year, tune out the pundits and predictors Your ears and your portfolio will thank you. And especially for those approaching retirement, your portfolio will thank you double if you max out your 2016 retirement account contributionsndashtheres still time. This months issue puts all of the deadlines and contribution limits right at your fingertips, along with a comprehensive list of Vanguards December special distributions and (of course) the name of my 2017 Hot Hands fund. Read More December 2016 December 1, 2016 The consensus in the 2016 presidential election was that Clinton would win, and if Trump somehow beat her, the markets would tumble. Wrong on both counts. I often say market timing is impossible because you have to be right twicemdashknowing both when to sell and when to buymdashbut there is another wrinkle to consider: Even if you predict an events outcome correctly (like who will win an election), you also have to know how markets will react. Im not about to abandon my simple principles of staying diversified and focusing on the long term, which I follow by partnering with the best managers at rock-bottom prices and spending time in the marketsmdashthey have served us well over the past quarter century. In this months issue, we try to prepare for the future by examining the past. First, I review our time-tested October Hot Hands strategymdashwhat it is, how its fared since I started tracking it 24 years ago, and why I chose October as the basis for this mechanical, long-term momentum-based strategy. Next, I take the claims of Jack Bogle and Vanguards Chris Alwine, that yields on bond funds can predict future returns, and put them to the test on the real data from November 1993 to October 2016mdashand show you what that could mean for returns through 2026. I also examine two Vanguard funds at important milestone anniversaries. And for subscribers who are still with us after all these years, I provide a roadmap to downshift the risk in your portfolio and transition from one of our more volatile portfolios to a less risky option. Read More November 2016 November 1, 2016 October lived up to its reputation as the worst month to invest in stocks (undeserved, since September has been the worst month, on average), with particular weakness in health care, thanks to fears over biotech and pharma companies bottom lines. I cant say it enoughmdashthese are buying opportunities, not reasons to sell. I believe any dollar you add to the pressured sector now, particularly to Health Care . will yield robust returns over the next three to five years. But despite strong fundamentals in the economy and the markets, 500 Index s three-year return number fell into the single digits as of the end of October. Will some investors see that as signaling a negative turn Sure. Do I see it that way Not hardly. In this months issue, in addition to the name of the new October Hot Hands fund, youll find a review of the slice of the stock market that I consider to be in the sweet spot for growthmdashmid-caps. Jeff and I crunch the numbers on just how much they outperform relative to large - and small-cap stocks, and break down all of Vanguards funds (index funds and actively managed) that invest in that space. Later on in the issue, Ill tell you what to expect in the next presidential term, but why I avoid making predictions when it comes to the markets. And finally, while last year was a bust for the strategy, Ill show you the data on why tech stocks tend to shine in the four-month Tech Winter periodmdashand why it pays to go active to play the strategy. Read More October 2016 Forget all the excitement around the first presidential debate or OPECs 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 wont they prospect of a Fed interest-rate hike. They didnt, 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. Im not going out on a limb to predict that volatility will continuemdashthe 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 is par for the course when it comes to investing in the wealth-building engine that is the stock market. In speaking of wealth-building engines, Jeff and I explore large-cap growth funds in this months fund focus. A large cap-growth fund should drive portfolio returns for years to come, and we will tell you which team is among the best in the business. Meanwhile, Health Care has hit a rough patch, but stick with the fund. We have an exclusive interview this month with portfolio manager Jean Hynes, who is concentrating on her highest conviction picks. Finally, Tax-Exempt Bond Index has proven to be a worthy competitor to Intermediate-Term Tax-Exempt since its inception just over one year agomdashfind out the best way to buy into index fund if you are interested. Read More September 2016 September 1, 2016 August is over, and with it ends one of the most mellow summer months that long-term investors like us have ever experienced. Itrsquos a safe bet that as traders return from the beach, wersquoll see volatility pick up. If volatility is coming, and with markets now below the highs hit mid-month, should we be selling, having already missed the top In this months issue, Jeff and I will show you why attempting to time the market by selling out when the indexes hit a new all-time high is a bad idea. And speaking of bad ideas, chasing Precious Metals amp Mining s 70.2 year to date return is another one. If you want an aggressive fund, there are much better and less risky options at Vanguard, and weve got the full rundown on them in this months Funds Focus. But while in some cases, indexing might be the way to go, dont assume that ETFs are superior to the traditional mutual fund structure. Just because something is new doesnt mean its bettermdashand that goes for Vanguards Alternative Strategies fund as well. Read More August 2016 With just two days left in the month, Vanguard slammed the doors shut on Dividend Growth . run by Don Kilbride. But what no one seems to have noticed is what Vanguard didnt do: Vanguard didnt add a second or third manager to keep the fund open. Following on the changes at Capital Value and International Growth . this is another move in what I think is the right direction of avoiding the multimanager messes theyve gotten themselves into at funds like Explorer and Morgan Growth . Also, if you only read the press release, rather than the prospectus, you probably missed the fact that Vanguard left itself the option of opening new accounts in Dividend Growth through its robo-advisory system, Vanguard Personal Advisor Services. Theres an exception for quotinvestors who are added and invest in the Fund only through technology-driven model portfolios. quot In this months issue, Jeff and I will tell you what your next best option is now that Dividend Growth is closed, plus (as promised) what to make of Vanguards various international stock funds. Meanwhile, Vanguard raised operating expenses on its state tax-exempt money market funds during the funds last semiannual operating period (theyll tell you they simply reversed fee waivers). My question is, if Vanguard was able to operate its funds at the fee-waived levels that were in place for the past few years, why couldnt they keep doing it And thats not the only area where Vanguards not being forthright with shareholders, claiming great since-inception performance for MidCap Growth . which has actually underperformed during its current managers tenure. In any case, while were busting myths, lets also take a look at claims that the markets are quotmore volatile, quot the future is quotmore uncertainquot and that a flattening yield curve leads to recession. Read More Invest for tomorrow, invest for the next year, or invest for the next decade I think a lot of investors were pondering those questions during the final week of June as stock markets first crumbled under the weight of the result of the Brexit vote on June 23 and then staged rebounds. Ultimately, as negative as the initial reporting was, by the end of June, Londons FTSE 100 index was up 4.4 for the month and actually 2.6 higher than where it stood prior to the Brexit vote. In this months issue, Jeff talks about the foreign markets and why you should continue to invest overseas in the first of our two-part focus on Vanguards global offerings. That said, more quotdiversifiedquot isnt always better, as Vanguard may have finally realized when it fired one of three management teams on Explorer Value in early June. Even more surprising, in the current semiannual reports for Windsor and Windsor II . three of the total seven managers actually disclose their underperformance. Is Vanguard seeing the disclosure light, or was this a mistake Whatever the case, you know that the disclosure requirements for how mutual fund board members invest in the funds they oversee are lacking. Still, Ive done my best to estimate the minimum Vanguards directors are doing, and its not pretty. And while were shedding some light on things, lets take a look at Vanguards Partnership Plan . whose dividend has grown more than 54 times since inception, while the value of one share of 500 Index has only grown 24 times including reinvested dividends. Still think Vanguard is a quotnon-profitquot Read More Last month was a roller-coaster of ups and downs catalyzed by guessing about the Feds next move. In the end, the bulls won, though not without plenty of negative sentiment. But why worry The overwhelming rationale for another rate hike will be that the U. S. economy is functioning properly, expanding well, and is showing some signs of a steady increase in inflationndashall positives for you, me, and stock prices. In any case, all the focus on whether the stock market indexes are making new highs or not ignores the fact that more than 90 of the time, stocks are going to be below their highs, as well show you in this months issue. And if you think rebalancing is going to minimize your risk or improve your returns, think again. In spite of what Vanguard claims, the data shows that neither rebalancing nor adding more managers to a fund is likely to help investors. And to knock down another myth, ETFs arent necessarily more tax-efficient than traditional index funds, as youll see in our follow-up to last months story on tax efficiency. But dont expect Vanguard to tell you any of that. Instead, pop open the issue and check out the rest of the 10 Things Vanguard Wont Tell You . Read More After a rough start to 2016, a relative calm seems to have settled over Wall Street. Volatility is down stocks are up and high yield is back in favor. Meanwhile, the first-quarter GDP report raised investor anxiety, showing that economic growth was extremely light for the third year in a row, at 0.5 growth. Would I like to see stronger economic growth Absolutely. Do I think the current slowdown warrants panic Not at all. In any case, if you missed last weeks Hotline . we made a trade in two of our Model Portfolios . Jeff and I have a recap of the trade and a full explanation of our reasoning for you in the issue. Of course, some of you may be sitting on some hefty long-term gains, so please feel free to check with your tax adviser about the tax implications. But when it comes to taxes, please dont make the mistake of making tax efficiency your primary goal in investing. What really matters is after-tax returns. Of course, thats just one of several things Vanguard probably wont tell youndashthe advice youll get from them is generally dumbed down to the point of being useless. More on both of those topics, plus a reader question about the equity allocations in our Model Portfolios . in the issue. Read More April 2016 The common quotwisdomquot of 2016 has been that the economy is headed for recession, the bull market in stocks is ready for a tumble, oil will remain under 30 per barrel, and wages are stagnant. But since mid-February, many pundits have reversed course, as stocks have rebounded to within 3.5 of their all-time highs, oil has pushed into the 40 range, and our slow-growth, not no-growth economy has continued to move ahead. In this months issue, Ill tell you why one of the best things you can do for your portfolio is to go on a media diet. Whether its predictions of gloom and doom from people like the discredited author of Rich Dad Poor Dad or Vanguards latest press initiative claiming expense ratios have been falling, you have to take everything you read in the media with a grain of salt. And by the way, the same goes for everything you hear about annuities, as Jeff explains in detail in this months Funds Focus. What about the four new funds Vanguard launched recently Well, I cant really get behind three of them, but one should rival index behemoth Total Bond Market Index. Read More March 2016 Note: Due to a hang-up in our mail production process this month, your mailed issue may be delayed by up to 3 days. After Januarys decline, February continued to grind investors downndashfor a while anyways. By months end, the Dow squeaked out a 0.3 gain, while the SampP index dropped 0.4. Total Stock Market Index . which had been down as much as 11.3 for the year, ended the month off 5.7, cutting that loss in half. Did you take advantage of the opportunities afforded by this manic market Did you trim from some of your best performers and add to the laggards If youre like most investors, you didnt, because its hard to sell your winners and buy your losers. But trades like that are exactly what long-term investors do when the markets hand them a gimme. In this months issue, Jeff and I answer your questions about recent laggards like Health Care and High-Yield Corporate . plus the purported correlation between stocks and oil that has been making the rounds in the media lately. Weve also got updates on Don Kilbrides performance at Dividend Growth . upcoming quarterly and supplemental distributions, and the international dividend funds Vanguard has been planning to launch. In any case, while I wouldnt recommend using Managed Payout to do it, if you havent yet funded your Roth IRA for 2015 or helped your children or grandchildren open their own, you still have until April 15 to do so. Jeff and I have some tips on how to go about it and what funds to start with in the issue. Read More February 2016 February 1, 2016 An old market chestnut says, quotAs goes January, so goes the rest of the year. quot Theres just one problem: While the so-called January Barometer has a 72 chance of being correct, simply betting that the market will go up gives you an 82 chance of being right. So lets acknowledge that declines like those we saw this past month are a natural part of investing. While the SampP 500 ended the month down 8.9 from its May 2015 high, those losses are behind us, and selling now wont change that. In this months issue, Jeff DeMaso and I discuss why youre better off ignoring Wall Street myths like the January Barometer, not to mention the regular rebalancing advice that Vanguard and the media love so much. While it may sound simple in theory, the data shows its a lot more complicated than you might think, and simply going with the flow without rebalancing isnt a bad idea. And speaking of going with the flow, weve got the full story on our momentum-driven calendar-year Hot Hands strategy. This years pick is the first foreign fund to make the cut since a four-year streak from 2003 through 2006. Are we setting up for a repeat Read More January 2016 Returns dropped, volatility rose, and in the end, 2015 left most investors with little to show for their efforts. Total Stock Market Index posted a 2.0 loss in December, finishing the year with a fractional 0.3 gain. Total Bond Market Index dropped 0.4 for the month and also finished 2015 with a 0.3 gain. But how that translates into what we can all expect in the coming year is the million-dollar question. In this months issue, Ive got both a recap of everything weve made it through over the past year and my outlook for the next year. As usual, the pundits got plenty wrong in 2015 with their wild and wacky predictions, and I expect more of the same from them this year. I just dont expect them to fess up to their mistakes like I do in my annual score card on my own predictions, which you can also find in this months issue. In any case, while my Model Portfolios didnt come through 2015 totally unscathed, they certainly werent broken, with returns ranging from -0.5 to 1.9, and their long-term record speaks for itself. I still believe active management worksmdashjust not in the form of multimanaged funds like Morgan Growth or Growth amp Income . whose poor performance Vanguard tries to justify in some rather misleading ways. Read More December 2015 December 1, 2015 Thomas Jeffersons observation that a walk about Paris will provide lessons in history, beauty, and in the point of life seems apt given the terrorist attacks that wracked the city on November 13mdashparticularly his sentiment that Paris will teach us about life. The terrorist attack in Paris was tragic, and if you feel as though these dramatic and dangerous events are happening more frequently, well, they are. Days like that chaotic Friday take their emotional toll on us, both as humans and as investors. But, as investors, we need to resist the initial emotional response to do something. In this months issue, Jeff and I review how events such as this have affected the markets historically. The bad news is there have been many. The good news is that over the long haul, we know we are going to make good money. But well do so with top-notch managers running low-cost funds, not the robo-advisers that Vanguard and other companies are now offering. If my experience testing one of Vanguards tools is any indication, the machines are in need of some serious human intervention. As for Vanguards intervention on U. S. Growth five years ago, the fund is on a better path, but Im not ready to put my money there just yet, as I explain in the issue. And for those of you whove been asking about October Hot Hands . Ive got all the details on how the strategy works. Finally, dont forget to keep an eye on the distribution calendar. Ive included a breakdown of all the dates you need to know for every Vanguard fund this distribution season. Read More November 2015 November 2, 2015 As bad as August and September were for stocks, October was a treat, with the SampP 500 index gaining 8.3 and the Dow up 8.5. Total Stock Market Index gained 7.8, its best monthly gain since October 2011s 11.5 rise. Total International Stock Index is off 1.0, and Total Bond Market Index is up 1.0. But for all the ups and downs, Total Stock Market has only ground out a 1.8 gain for the year to date. This year could end up much like 2011, with little to show for all the day-to-day action. In any case, investing is hard, and the notion that you can find your way through the morass with a simple online questionnaire is ludicrous. In this months issue, Ill show you the problems with the quizzes and robo-advice youll find on Vanguard and similar sites. Also this month, Jeff and I have a full-blown look at Vanguards foreign and global funds. Please do yourself a favor and read it carefully before you take Vanguards recommendation to allocate as much as 40 to 50 of your equity portfolio to foreign shares. Plus, weve got a closer look at Global ex-U. S. Real Estate and Short-Term Inflation-Protected Securities Index . both of which have been rather disappointing so far. Meanwhile, as many of you know, its time for both October Hot Hands and Tech Winter . Do these two momentum strategies warrant a change in our portfolios this year Find out in the issue. Read More October 2015 Its been a while since weve 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 therell be an inordinate focus in the media on the past few months returns. But what weve 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 wouldnt chalk this up to anything more than what it isndasha market setback. It isnt 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 proceedsndashor in other words, creates a reinvestment risk you didnt have before. In this months 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 Ill explain why in the newsletter. (Did you know Jack Bogle owns both actively managed funds and even shares in his own sons 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, dont jump for a muni fund just because its tax-exemptmdashwhat 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 2015 September 1, 2015 In July 2010, I led this newsletter with a story titled China Syndrome . At the time, investors were giddy over Chinas announcement that it would let its currency, the yuan, begin to float higher against the dollar. That year, the Shanghai market gained only 1.4, versus an estimated 65, and optimism about China, its growth prospects and its stock market cratered. Sound familiar The recent focus on China, supplanting the markets focus on Greece earlier this year, has again raised the bears from their slumber. But as Jeff and I have been saying over the past month, the focus on China is over-done. And thats not all that is over-done. Another topic that has the pundits in a panic is interest rates. In this months issue, I explain how, despite the low yields investors face today and the expectation for rising rates in the future, bonds absolutely still have a role in balanced portfolios as volatility buffers. In the same vein, I have in-depth commentary on Vanguards stable of bond funds, including which ones to buy and sell. I also reveal one Vanguard insiders reservations about the mutual fund giants security gamemdashand what you can do today to better protect your account. Finally, the list of Vanguard funds paying quarterly distributions got a lot longer. Make sure that you double-check the list so you dont buy a distribution. Read More August 2015 Was global warming to blame for the GDP revision showing the U. S. economy growing, rather than shrinking, during the first quarter I doubt it, but according to the Bureau of Economic Analysis, the economy continued its slow-growth, not no-growth momentum in the years first three months. And in Washington, D. C. where hot air is a fact of life, Janet Yellens Fed is warming to an interest-rate hike after all, despite the fact that inflation hasnt met its targets, whereas job creation and employment have. I In this months newsletter, Ill explain why I dont believe rising interest rates are bad for investors. In fact, I look forward to them, and I think you should, too, as I explain in the second part of my multi-month series on bonds, where I discuss some of the risks associated with investing in bonds and bond funds. Also, I have a few words to say in response to Vanguard founder Jack Bogles comments on disclosing executive compensation in the August 2015 issue of Money Magazine . Finally, Ill explain why investors shouldnt shy away from investing in foreign stocks, despite the messy headlines outside of U. S. borders. If you didnt take my advice in the March 19 Hotline to add to your international holdings, now is as good a time as any. Ill tell you which fund to use. Read More Try as they might, the Greek government couldnt kick the debt can any further down the road as June closed. Having tried to bundle payments, defer payments, and finally call a vote on payments, Greece blinked before the eurozones leaders and was forced to stop a euro drain by closing the banks and stock market to keep whatever money was still in the system from disappearing. Not that the Greeks were alone in sparking volatility across the globe. Halfway across the world, Chinas stock market displayed some pre-July 4 fireworks last month, as the skyrocketing Shanghai and Shenzhen markets hit an apex in mid-June and began a speedy return to earth. Vanguards may get lucky with its timing in adding A shares to Emerging Markets Index mdashor notmdashbut either way, Shanghai has been here before. This month, Ill explain why I view the big hubbub about Vanguard adding China A-shares to Emerging Markets Stock Index later this year to be more of a meh. Speaking of a lackluster response, fund of funds Diversified Equity celebrated its 10-year birthday last monthmdashand Ill show you why its a birthday Vanguard probably wont be celebrating. Also, with the Fed on course to raise the fed funds rate for the first time in nearly a decade, its time to revisit our Bonds 101 series. This month Im covering bond basics in order to set the stage for a more complex conversation on bond risks and specific funds to buy, sell or hold. Lastly, Imdashalong with Hapless Harry and Disciplined Davemdashwill illustrate why long-term investors should not worry about investing at a top, but instead just stay the course and keep putting their money to work. Read More So much for the old market chestnut, Sell in May and stay away. May has seen U. S. stocks year-to-date return just about double since the end of April. Through April, 500 Index was up 1.9 on the year through Mays close it is up 3.2. I know there are five more months to go, but this is at least a tripwire for Sell in May adherents and just one example of why it can be so hard to follow the strategy in real life. In this months issue, Ive got a full breakdown of the Sell in May strategy and why reality has a nasty way of making the averages look a whole lot worse than the numbers suggest. But market timing isnt the only place conventional wisdom is off the mark. Jeff DeMaso and I did the math on the claim that ETFs are more tax-efficient than traditional index funds and found it simply isnt true. But good luck getting Vanguard to tell you that. Judging by their advice on U. S. Growth 10 years ago, the list of funds theyve dubbed Select and their new Personal Advisor Services, even cheap advice can turn out to cost you more than you know. You can find my take on all three in the issue, along with an update on the new Alternative Strategies fund and upcoming semiannual distributions. Read More Are you ready for Dow 16460 You should be. But thats not a prediction. Its a warning, and its based on history, not conjecture. Most investors arent ready for a 10 market decline, in spite of the fact that historically, they usually happen about once every 18 months. But if you think selling at all-time highs or on 5 dips will let you sidestep bigger declines, think again. The odds are against you, as you can see in this months newsletter issuendashand so is the tax law, which takes a big bite out of any profits you might make with a short-term trading strategy. Speaking of taxes, while April 15 is past, the sting of taxes paid remains. But before you rush out to buy the most tax-efficient funds, check out the tables Jeff and I have for you this month. As weve said time and time again, its not tax-efficiency that matters most, its after-tax returns. And index funds dont necessarily rule the roost: Six of the 10 funds with the best after-tax returns over the last three years were actively managed. Of course, that wont surprise many of you, since we already own several of them in our Model Portfolios . Also, while Selected Value didnt make the list, for those of you who are concerned about its ho-hum performance in the past year, weve got an interview with managers Jim Barrow and Mark Giambrone. You may find it enlightening. Finally, after five years, is Explorer Value a buy And just what is the ideal foreign stock and bond allocation, anyway Get the answers to these questions and more in this months issue. Read More April 2015 Its been a terrific six-year bull run. So are we at the tail end of a raging bull market thats about to be gored Or does our slow-growth-not-no-growth economy drive prices even higher I wouldnt be surprised if youre feeling pushed and pulled by the myriad commentaries about market peaks that permeate the media. Many commentators already have a view, bullish or bearish, and then pick the data point that supports their stance. Whatever the crystal-ball gazers and market-timers tell us, Ill continue to partner with the best managers at Vanguardmdashand Ill continue to help you do the same. With the dollar as strong as it is now, this is as opportune a moment as any to take a few dollars off the table and use them to buy better valued stocks denominated in weaker, non-dollar currencies. In this months issue, Ill share details of several trades I recommended in the March 19 Hotline to boost our allocations to overseas shares. Ill also highlight the benefits of opening (and funding) an IRAs for a teenager or young adultmdashlet the power of compounding work for them early and theyll have a big leg up for their future. Also in the issue, Vanguards newest actively managed stock fund is gaining attention and inflows. Ill break down the funds strategy for you and show you what I think investors in the fund should expect going forward. Read More March 2015 Investors around the globe were seemingly on tenterhooks in late February, waiting to see how the battle between the EU and Greece would pan out. In the end, Greece reached a deal to kick the can down the road, and markets roared ahead, with the Dow, the SampP 500 and myriad other equity indexes hitting record highs in February. But while U. S. stocks have outperformed foreign markets in four of the past five calendar years, Research Director Jeff DeMaso and I wouldnt advise putting all of your nest egg in the domestic basket, for reasons we explain in this months issue. Instead, stick with the managers weve invested with through thick and thin via the funds in our Model Portfolios . If youre new to the newsletter or just need a refresher, weve got the rationale for each pick in this months Funds Focus . plus an exclusive interview with Charles Plowden of Baillie Gifford, who shares his thoughts on the foreign vs. domestic question as well. Sadly, you can only get a diluted piece of their expertise, thanks to the multimanagement structure of Global Equity . International Growth and U. S. Growth . Of course, Vanguard always tries to claim multimanagement is a good thing, but as Ill show you in the newsletter, their latest attempt to do so initially fudged the numbersmdashsomething Jeff and I strive never to do in our monthly reports of just how our Model Portfolios have done, good or bad. We think youll find the long-term track record overwhelmingly good. Read More February 2015 February 2, 2015 After a down-again, up-again month, January saw the Dow Jones index decline 3.7, off 4.9 from the high reached at the end of December. This isnt even close to a meaningful correction. But just because were near a market high doesnt mean you should wait to invest. Jeff and I put the lie to that notion in this months issue, along with the idea that ETFs are inherently superior to traditional index funds. Of course, if youre relying on Vanguards website for ETF performance, you probably wont know that, because they dont use real trading data. Ive taken actual investments in every one of Vanguards ETFs and calculated the real numbers to see just how far off the mark they are. Meanwhile, I always update the Hot Hands strategy in February, and while the 2014 Hot Hands fund, Explorer . disappointed, the long-term record of buying the hot manager remains quite good. Ive got the full story in the issue. Whats not so hot is the Managed Payout concept, which continues to be a loser even after Vanguards merger of three funds into one. Im sure most shareholders dont realize that the income theyre earning is almost completely made up of returned capitalmdashor how far off Vanguard was when it calculated tax-equivalent yields in its muni funds annual report. In any case, four years after withdrawing its filings for three muni bond ETFs, Vanguard is back at it again with Tax-Exempt Bond Index . filed in January and expected to launch in the second quarter of 2015. Read More January 2015 Whether it was the North Korean hack of Sony Pictures, the rebuilding of bridges with Cuba, or Russias plunging ruble and rising rhetoric, not to mention large losses in the oil markets, red was the color of the month. Early on, it appeared that despite a stellar 2014, the U. S. stock market might actually end the year on a negative note. After Fed Chair Janet Yellen came to the rescue with a commitment to keep interest rates low well into 2015, though, we saw some of the strongest buying Wall Street has had in years, and the market lost a fraction for the month. With a changeable world and a changeable market, having a long view is important, so Ill give you my Outlook for 2015 in this months issue. But unlike most of the prognosticators out there, Ill also remind you what I said in the same space one year agomdasheven where I got it wrongmdashin my annual Report Card . Plus, Ive got a recap on the major events of 2014 for Vanguard and for the world to help you put the year in perspective. As for this year, Ill bet some of you are wondering what the 2015 Hot Hands fund is. If you missed the announcement earlier today . Ive get a reminder in the issue. But whether youre following this momentum strategy or not, dont forget to save for the long term. Irsquom funding my IRA for 2015 today, and you should, too. Read More December 2014 December 1, 2014 If theres one thing I got wrong this year, it was my sense that stock investors were headed for increasing volatility after years of calm. Consider November: The Dow Jones Industrial Average hit no fewer than 12 all-time highs in just 19 trading days (the SP 500 index did the same). But those highs came on slimmer and slimmer gains. On all but three days, the Dow gained 0.23 or less to reach a new peak. Heck, on the final day of the month the Dow hit a high on just a 0.49-point rise. This doesnt mean the market is necessarily topping out, but it could be interpreted to mean that it isnt wild-eyed optimists driving the indexes higher and higher. Speaking of optimism, I have high hopes for a strong year with the October Hot Hands strategy. As you may remember, Jeff and I announced the official October Hot Hands fund last month. This month, well provide a more in-depth explanation for those of you who arent familiar with the momentum-based strategy. Also this month, Ive got several stories to answer your questions about why we invest with Vanguards best active managersndashand diversify with both foreign stocks and bondsndashin spite of periods of underperformance. Finally, Ive got updates both on estimated year-end distributions (the most unpleasant surprise: U. S. Growth ) and the suspected phishing letters some Vanguard investors received (Vanguard says they were triggered by a legacy issue with Pershing, not a scammer). Read More November 2014 November 3, 2014 October was a tale of two months. During the first half the SampP 500 dropped 7.7 from 1972 on September 30 to an intra-day low of 1820 on October 15. Then stocks reversed course, gaining 10.8 and bringing the SampP 500 to a new high at month-end. In a nutshell, volatility has been rising. But that volatility is completely normal. Weve gone more than three years without a 10 or greater setbackmdashthough we came close to one a few weeks ago. Historically, 10 drawdowns occur about once every 18 months, on average. We are due. And now that were nearing the end of the year, many of us are also due for capital gains distributions from the funds we hold. In this months issue, Research Director Jeff DeMaso and I have an early preview of where the potential big ones lie. Plus, weve got an update on Tech Winter . the period from November through February where tech-heavy funds at Vanguard show seasonal strength, and the final word on our October Hot Hands fund as promised in last weeks Hotline . And by the way, for those of you who responded to our employer-sponsored plan survey, weve got an update for you. In this months 401(k) Focus . we take a look at the FedEx 401(k) plan and how its changed since I first covered it in 1994. Even if you dont work at FedEx, I think youll get some valuable lessons out of it. And the same goes for the experience one readers wife had after transferring an IRA with a closed fund in it to Vanguard. It took months, but persistencemdashand, Im guessing, a shove from memdashgot Vanguard to come through. Read More October 2014 All hail Joshua Barrickman, the new Bond King. Joshua who Barrickman heads Vanguards fixed-income indexing group and is the named portfolio manager on Total Bond Market . If it isnt already, Total Bond Market will soon be the largest bond fund in the world after the Sept. 26 announcement that Bill Gross, founder of PIMCO and until recently the official Bond King, announced he was leaving his post as manager of the flagship Total Return Fund. Money has been flowing out of the Total Return fund since April 2013, and investors withdrew 10 billion on the day of the announcement alone. All hail the king. In this months issue, we launch into Vanguards reponses to investing for retirement, which is without doubt a complex, long-term challenge. The mutual fund industry, Vanguard included, has provided investors with what appear to be very simple solutions: Life-cycle funds in the guise of Target Retirement Income and its ilk. I have some serious issues with the one-size-fits-all promise of life-cycle funds. But they are a popular choice, and for some savers the only options in their 401(k) plans, so Ill try to help sort out Vanguards life-cycle options and provide enough information for you to make your own informed decision. Ill then tell you why I think that you can do better with just a little extra effort. Also in the issue, I illustrate the effects of geopolitical events on the market and show you why you shouldnt panic when the world becomes uncertain. And finally, Ill tell you about Vanguards multimillion-dollar money fund decision, with far-reaching effects on the fund market. Read More September 2014 September 2, 2014 The worlds a mess, but I expect diversified portfolios such as ours, with year-to-date gains of 7.8 to 8.4 and allocations to great managers in the large-cap, mid-cap and health sectors, among others, to continue to provide a good ride through the global turmoil, whether its geopolitical or market-induced. Let the naysayers and bears keep growling. Last month, I told you that I thought all the chatter about the stock markets imminent demise, having fallen a few percentage points from its mid-July peak, was a bunch of hooey. Well, the SampP 500 index hit multiple new highs in August (Vanguards 500 Index rose 4.0), while at the same time, more and more economic data confirms that the U. S. economy is growing nicely, with corporate profits also moving higher. In this months issue, Research Director Jeff DeMaso and I have put together a package of items that we hope will address some of the questions at the top of your mind. For instance, with the markets at all-time highs and near-zero interest rates, is cash trash or king Get my take in this months Funds Focus: Money Market Funds, along with several potential money market fund alternatives. But before you try to time the market, take a look at the powerful effect compounding can bring when you stick to a long-term investment plan through thick and thin. With little more than time and discipline, you can reach a tipping point when you make more money off your gains than your principal. That said, dont simply set and forget your portfolio. No one cares as much about your money as you do, and you should keep a close eye on your accounts to protect yourself from Vanguard service errors like those one investor told me he had to deal with this year. And while I do think Vanguards push to consolidate mutual fund accounts into a brokerage umbrella makes sense, some headaches are bound to pop up. The better prepared you are, the easier they will be to deal with. Read More August 2014 The economy is in a long, slow grind higher. Whether its GDP, labor, or personal incomes, were grinding higher on most or all fronts. I continue to believe that a 10 correction would be a healthy setback and would knock some of the fluff out of stock prices. In addition, since Wall Street tends to throw the babies out with the bathwater during corrections, our managers would be like kids in candy stores given the pricing dislocations. So, I say bring it on. In any case, with QE3 coming to a close, all eyes and ears are on just when and how much the Fed will raise rates. Is a Fed rate hike the death blow for the markets I dont think so, and Ill show you why in this months issue. And thats not all Ill show you. Vanguards board hates it when I do this, but its that time of year when I put the data together to show just which funds the directors are and arent investing in, including who has the best record of aligning himself with shareholders, and who has the worst, collecting lots of fees but not buying many Vanguard fund shares. Speaking of fees, heres another question for Vanguard: What does at cost actually mean Does it really cost 400 million to run just two index fundsmdash 500 Index and Total Stock Market Index . Jeff and I have run the numbers to try to get to the bottom of this. Meanwhile, a lawsuit filed against Vanguard also goes to the heart of the cost question. If successful, it could have seismic implications for the company and mutual fund investors across the industry. Read More Summers here, and we have yet to see a significant pullback in the stock market. At the end of June, most of Vanguards equity funds were at or within fractions of their all-time highs. But while the stock bull market is now more than five years old, I dont think its over by any means. Are there potholes in the road ahead Im betting on it. Thats why you and I keep our wits about us and a few bond funds in our portfolios. For some perspective, check out my stories on todays low yields, stock and bond correlations, and Vanguards foreign bond funds, and dont miss my interview with Greg Davis, who took charge of Vanguards Fixed Income Group following Bob Auwaerters retirement. One thing we dont want in our portfolios, though, is bloat. Its just too bad for shareholders of Explorer that Vanguard doesnt understand that. Ive got the full story on the recent addition of an eighth manager to the fund, and Vanguards obfuscation of the matter, in the issue. With a formula focused largely on assets under management rather than performance, you can decide for yourself whether Vanguards top executives earned their latest Partnership Plan pay hike. Just dont take their multimanagement PR, or Bill McNabbs comments in the semiannual report for Morgan Growth . at face value. Read More As with so many of the economic signposts wersquove seen over the past several weeks, therersquos a little bit of darkness and a little bit of light in each. Take Fridayrsquos consumer spending and income report, for instance. The pessimists saw Aprilrsquos spending decline of 0.1 as a signal that the economic expansion is in trouble. The optimists noted that despite that decline, spending actually rose on a year-over-year basis to the fastest rate in two years. Despite trying to cut my sodium intake, I take the market prognostications and crystal-ball predictions from both sides with a massive amount of salt. In the same vein, no one can consistently predict which market sector will lead the way (or fall behind) in any given year, much less any month or quarter. As I explain in this monthrsquos Funds Focus on Vanguardrsquos sector-based offerings, if you are going to try your hand at being a sector investor, yoursquod better have a disciplined strategy guiding you. One way to do that: Avoid trading and simply partner with one sector for the long term, as I have. Speaking of long-term, thats one of the key themes guiding Charles Plowden, who heads the Baillie Gifford team running a third of Global Equity . Check out our exclusive interview to find out what he looks for in an investment. By the way, dont panic, but a bear market in small-caps could be right around the corner. How do I know Because small-caps decline an average of nearly 20 about once a year. In any case, dont think the newly reconfigured Managed Payout will solve all your income problems. Vanguards made some improvements, but I remain skeptical that theyre enough. Read More The Dow hit a new high on the final day of April, but every day stocks fall, investors are greeted with headlines warning that this is the correction. The fact is that market declines are a part of the fabric of our daily investment lives. Over the 8,000 or so trading days covering the last three decades, the stock market has been 5 or more below its most recent high almost 50 of the time. Instead of worrying about book promoters claiming that the market is quotriggedquot by high-frequency traders, your best bet is to trade less, ignore the noise and focus on the long term. But thats not the only place you need to shift your focus. In this months issue, Ill show you why its not tax-efficiency that matters most, but rather after-tax returns. While U. S. Growth gets the award for the highest tax efficiency, it falls short in the after-tax performance racendashthough that didnt stop Vanguard Chairman Bill McNabb from suggesting the fund has emerged from its long slump. And heres something I bet you didnt expect: While lots of people assume ETFs are more tax-efficient than their traditional index fund counterparts, the data for Vanguards funds says otherwise. Meanwhile, gold bugs are likely to be very disappointed by the results for Precious Metals amp Mining . in spite of what McNabb says about the fund beating its peers. Read More April 2014 Has the stock market suddenly become more rational High-flying biotechnology stocks gave up 10.6 of their gains in March, and the hot market for initial public offerings (IPOs) cooled off as King Digital Entertainment tumbled 19.2 from its 22.50 offering price. The Dow remains 0.7 off its Dec. 31 record close, while the SP 500 index did post a new high on Mar. 7 before backing off 0.3. Hopefully, investors expectations have ratcheted down a bit as a result. Either way, its time in the markets, not market timing, that matters. Dont believe me Check out the story of Disciplined Dave and Hapless Harry in this months issue. A little discipline can go a long way toward closing the gap between fund returns and investor returns. Which brings us to my next point: If you havent funded your IRA yet, do it now, so you dont suffer from the procrastination penalty a recent Vanguard study discussed. Then help your kids and grandkids get in the act with their own Roth IRA. Not sure which fund to start them with Ive got a few suggestions in the issue, plus an interview with Don Kilbride of Dividend Growth and a look at the management changes Vanguard has made at Selected Value . March 2014 February began with dire predictions about the state of the markets, yet it ended with good gains as the SampP 500 and various small - and mid-cap indexes hit all-time highs. So are you going to listen to all those people telling you, ldquoAs goes January, so goes the yearrdquo I wouldnrsquot, and Irsquoll show you why in the issue. But thatrsquos not all you need to watch out for. With the bear market of 2007 to 2009 almost entirely wiped from the record, five-year returns are shooting through the roof. These numbers mean nothing, and you are better off ignoring them. Where do the best values lie now Irsquoll tell you in this monthrsquos Funds Focus . covering Vanguardrsquos growth and income funds. As for those whorsquove asked when to get started with my Model Portfolios . my answer is simple: There is never a better time than now, because itrsquos time in the market that matters, not market timing. Read More February 2014 February 3, 2014 Investors are nervous about keeping the gains earned in the five years since the market bottomed in 2009, with the Dow Jones Industrial Average falling 5.3 from the all-time high established on the last trading day of 2013 and the 10-year Treasuryrsquos price rallying 3.5 in January. But the increasing volatility in stocks is what Irsquove been warning about for some time now. I could give you lots of stats, but consider that in the first month of this new year, there were six days in which the Dow saw intraday moves greater than 200 points. In 2013, there were 23mdashfor the entire year. In this issue, Irsquoll give you some further perspective on the marketrsquos increased volatility. Hint: The key to success is time in the market, not market-timing. Also, for those of you nearing or starting retirement, Research Director Jeff DeMaso and I have a look at another strategy we couldnrsquot fit into the December issue. In this case, the theory seems good, but Irsquom not sure it would work so well in practice. For the more adventurous among you, as promised, we have our full update on the Hot Hands strategy, but like I said before, this year Irsquom sitting it out. Whatever you do, though, be sure to keep a close eye on your Vanguard accounts. Irsquove been noticing some odd things on their website, from minor inexplicable return discrepancies to instructions that mysteriously went unexecuted. By the way, some of you asked for clarification on the Average Vanguard Investor Index. Irsquove got the details for you in the issue. Read More January 2014 Happy New Year, and welcome to 2014. While I wouldnt put too much stock in the punditry that inspired my newly christened Roubini Award, everyones got to have an outlook. Ill tell you what mine is for 2014 in this months issue. But unlike most of the prognosticators out there, Ill also remind you what I said in the same space one year agondasheven where I got it wrongndashin my annual Report Card. Plus, Ive got a recap on the major events of 2013, which might help put Total Stock Markets 33.3 gain and Total Bond Markets 2.3 loss in perspective. For Vanguard, the past year was a pretty big one, with several longtime managers leaving a slew of funds launching, reshuffling their share classes, or merging out of existence and a fair share of fund closings and reopenings, too. As for this year, Ill bet some of you are wondering what the 2014 Hot Hands fund is. If you missed the earlier announcement in todays Hotline, Ive get a reminder in the issue. But whether youre following this momentum strategy or not, dont forget to save for the long term. Im funding my IRA for 2014 today, and you should, too. Read More December 2013 December 2, 2013 Is it the year 2000 again, or is it 2006 Social network and microblogger Twitter went public on Nov. 7 at a pre-market valuation of 18.1 billion, then saw its stock promptly soar 72.7 on the day and trade over 117 million shares. Are we witnessing another tech bubble agrave la 2000 And when you focus in on the Dow Jones Industrials, the ldquovolatilityrdquo wersquore experiencing (or lack thereof) looks a whole lot like 2006. I would hate to see investors lulled into the market by the relative complacency with which weve been hitting recent highs. My admonition to you: Please keep expectations in check. Speaking of expectations, nobody knows just what their retirement will be like, but this issue has my tips for how to live on your well-deserved earnings during retirement. One thing I can tell you off the bat: Once you set your course, stay disciplined . On the same topic, I have an Interview with John Ameriks, a 10-year veteran at Vanguard who currently leads the active equity team but is also one of the firmrsquos experts on retirement. He has some opinions on some of the very same strategies I mention in the article on retirement. And, of course, as promised, I have more for you in this issue on the October Hot Hands strategy, one of my proprietary momentum-based strategies that has beaten the market over the long haul. Read More November 2013 November 1, 2013 The stock market didnrsquot fall in September, and it didnrsquot fall in October. In fact, it hit record highs, with Total Stock Market Index posting an 8.0 total return over the two months alone. So much for the gloom-and-doomers and the ldquoSell in Mayrdquo crowd. But a word of caution is in order. With October 2013rsquos end, five-year returns will now be completely rid of the horrific month of October 2008, and the numbers are soaring. Dont be fooledmdashthese point-in-time numbers do not tell you how the typical investor did, and the next five years will not look anything like the past five. October was also a big month for Vanguard, which announced it is phasing out Signal class shares in favor of Admiral shares and merging redundant and unsuccessful funds, including some of the Tax-Managed and Managed Payout funds, out of existence. Unfortunately, the merger of U. S. Growth and Growth Equity doesnt appear to solve any problems for their shareholders. You can find my pro forma analysis of what the combined portfolio will look like in the issue. As for the ongoing rollout of the Affordable Care Act, how has the picture for Health Care changed Check out my interview with manager Jean Hynes for her take. And speaking of changes, International Growth is losing a manager to PIMCO. If you missed my update on that or the October Hot Hands fund, Ive got a recap of both for you in the issue. Read More October 2013 In spite of its reputation as a bad month for stocks, speculation over Fed tapering, and dire warnings of a government shutdown, September made mincemeat of the pundits predictions that it would be quotlosses all around. quot Stocks gained bonds gained and investors who tried once again to time the market got their heads handed to them. If September taught any lessons, it was that you shouldnt set your investment course by the speculation that defines the daily news cycle. That said, volatility may be rising in the coming weeks. In this months issue, Ive got a 10-step program to help you prepare and overcome any queasiness you feel. While Vanguard announced its own answer to volatility in the new Global Minimum Volatility fund just before month-end, I think there are much better ways you can deal with it. And if youre searching for income, I dont recommend the latest fad of quotunconstrainedquot and quotstrategic incomequot funds being touted by the industry. Research chief Jeff DeMaso put together some pretty compelling statistics on whats been going on in this universe, and its not pretty. Nor is the lack of commitment in Explorer shown by Vanguards board of directors and fund managers. Vanguard thinks their system of piling manager on top of manager works just fine. I think theyre nuts. But Ill give you the stats and let you decide. Read More September 2013 September 3, 2013 Funny, but for all the talk of quotrisk-onquot and quotrisk-offquot earlier this yearmdashas Europes markets and economies were teetering on the brink, backing away and then pushing to the edge againmdashI havent heard anyone talking about quottaper-on, taper-off. quot But thats whats been driving the markets of late, and in the perverse logic that only Wall Street can conjure, strong economic news, which should be good for stocks, instead suggests Fed tapering, and stocks sell off. My bets on no taper in September at all. Nonetheless, I expect both bond and stock markets to become more volatile as we head into September. (And no, I dont expect more market mayhem akin to the Nasdaqs 3-hour trading halt.) In this months issue, I delve into Vanguards large-cap growth fund options with my comments on each. Opportunity remains here, thanks to comfortably average valuations and investors neglecting the asset class, but check your expectations at the door. Ive also got my thoughts on how Vanguard multi-management strategy has impacted Explorer s fortunes, as Vanguard beefs up the number of sub-advisers on the fund further. And speaking of sub-advisers, its been a year since Vanguard said goodbye to AllianceBernstein, and in the issue I review how performance on its former funds has been in that year. And finally, as I promised in the August 29 Hotline . I have more to say about my trade out of GNMA . While our foray into GNMA didnt go as planned, if we step back and consider the Model Portfolios as a whole, rather than focus on any one position, they are generating strong returns. Despite this misstep, my philosophy of buying the manager, not the fund will continue to serve us well in the years ahead. Read More August 2013 Ive been telling you our economy was growing, albeit at a slower-than-desired pace, for years now, and the GDP report issued at month-end offered up plenty of evidence that indeed thats the case. More important than the GDP report, though, was the Feds latest statement. Expectations in the bond market have undergone a sea change now that the prospect of tapering is on the table, and interest rates are on the move. We could see a lot more volatility in the bond and stock markets next month as Congress returns from vacation, giving our fund managers opportunities to pick up some bargains. In this months issue, Ive got a review of each member of Vanguards stable of aggressive stock funds, including one old favorite that isnt so aggressive anymore. I believe there are still gains to be made herendashparticularly if you have a long time horizon. Ive also got an in-depth review of Windsor s comeback, including an interview with Jim Mordy, the manager of Wellington Managements portion of the fund. Youll also find a recounting of the first five years of Total World Stock Index (dont mind me if I dont bring an anniversary present) and a response to a subscriber question about Vanguards dividend-focused funds. Read More Wall Streets quotshoot first and think things through laterquot mentality was in full flower during June, as stock and bond markets fell in concert following Fed chief Ben Bernankes press conference on the 19th. Over four days, the stock market dropped about 3.5, and Treasury bond prices lost about 3.4. You and I have had a pretty detailed conversation about bonds and bond funds over the past several months, so you already know my general take on them, plus my ratings for Vanguards taxable bond funds. This month, lets focus on municipal bonds, also known as quotmunis, quot or tax-free bonds. Also in this months issue, if you missed our month-end trades in the Model Portfolios . Ive got a recap of those for you, plus an interview with Virginie Maisonneuve, manager of International Growth . And for those of you whove been asking how to help your children or grandchildren get started with an IRA, I have an update on retirement investing for young investors. Just dont get taken in by Vanguards bone-headed quotresearchquot on multi-management, which concludes unsurprisingly but unconvincingly that quotthere are no dramatic differences in median performance between the two management structure categories. quot Read More Bonds got battered in May, as the yield on the benchmark 10-year Treasury jumped from 1.67 at the end of April to 2.13, and prices dropped. Hardest-hit were long-duration funds like Extended Duration Treasury ETF . which tumbled 9.8, while short-term funds held up best, with the ultra-short Short-Term Tax-Exempt falling just 0.1. I hope your greater knowledge about bonds and interest rates from the Bonds 101 series weve been running for the past couple of months helped you understand and weather the fairly rough sailing. Following up on the first two parts of the series, this months is also big on bonds, including updates on all of Vanguards taxable bond funds as well as its foray into foreign bonds with Total International Bond Index and Emerging Markets Government Bond Index . both of which finally began trading by months end. Whether you should buy them, though, is another story. See my feature article on these funds for more. Whatever you do, beware of reaching for yield. Investors who do so often ignore the other side of the total return equationndashnamely, capital risk. Research Director Jeff DeMaso put together a pretty compelling example for you this month showing how a lower-yielding investment can actually give you the same monthly income, with far less risk. Read More From David Stockman to Reinhart and Rogoff, and the Boston Marathon bombing to a piece of wreckage from 911, old ghosts came back to haunt investors in April. Yet both the Dow and the SampP 500 went on to new highs during the month and closed up 1.8 since March. The rising stock market combined with falling interest rates set up an intriguing dynamic, as the top two funds represented both ends of the spectrum, with Telecom Services up 8.3, and Extended Duration Treasury ETF up 7.3. I wouldnt recommend either, as theyre far too narrow and risky. (Check out Part II of my Bonds 101 series for more on the risks of the bond market.) And if youre looking for a store of value, I dont think youre going to find it in gold, or Precious Metals amp Mining . In spite of political and financial tumult across the globe, both fell about 9 during April, and remain far below their all-time highs. Also in this months issue, if you missed my advice on what to do about Capital Opportunity s reopening, Ive got a recap for you, along with updates on South Koreas place in Vanguards index funds, ongoing fee waivers at its money funds, and a solution to the bond market index problem Jack Bogles been talking about. Read More April 2013 What a quarter The Dow index rose 11.3, and the SampP 500 rose 10.0. But mid-cap and small-cap stocks were the real performers, with the SampP MidCap 400 index up 13.1 and the Russell 2000 index up 12.0. Total Stock Market . up 11.0 this year, is at an all-time high. So are more than 30 other Vanguard equity funds. Are we investors setting ourselves up for a fall If you listen to the cries of those who make money mainly from scaring the unsuspecting, wersquore headed for a 30 to 90 decline any day now. I donrsquot buy itndashmy philosophy runs more along the lines of Jim Barrow, the longtime manager of Windsor II and Selected Value . who asks: Wouldnrsquot you expect prices to be at or near highs when earnings are at or near highs I encourage you to read the rest of our interview in this months issue. Plus, while investors are still piling into bonds, I wonder if they really understand the risks theyrsquore taking with interest rates at near-record lows. Ive got a refresher for you in the first part of a series called Bonds 101 . Meanwhile, when it comes to dealing with the closing of Intermediate-Term Tax-Exempt or whether South Korea is a ldquodevelopedrdquo market, dont take everything Vanguard says at face value. Ive checked the facts, and parts of their arguments simply dont fly. Read More March 2013 Its time to throw the bums outmdashboth those in Congress and those on Wall Street. In Februarys final week, we saw wild gyrations in stock prices that had absolutely nothing to do with whether earnings were rising or falling, nor whether interest rates were about to make a major move either up or down. Instead, worries about Italys election, sequestration, stalemates in the halls of Congress and yes, a debate over the propriety of the First Lady getting involved in the Oscars are what dominated headlines. I was more interested in the fact that the housing market continues to move forward, and that the first-reported 0.1 decline in Q4 GDP was actually a 0.1 increasemdashless of a revision than expected, but a minor positive nonetheless. Meanwhile, Vanguard had a busy month as well, with Wellington and Intermediate-Term Tax-Exempt closing to new adviser and institutional accounts (but not retail investors like you and me), two new managers at Windsor II . and word that the new international bond index funds should be launched by the end of the second quarter. More quietly, Vanguard also filed papers indicating it will be raising fees for the Guaranteed Lifetime Withdrawal Benefit (GLWB) available for a couple of its annuities, adding one more item to the case against investing in annuities. Ive got a full analysis of how to tell if they make sense for you in this months issue. Also, dont miss the exclusive interview with Don Kilbride, manager of Dividend Growth . which continues to put up smart numbers with a laser focus on battleship balance-sheet companies. Read More February 2013 February 1, 2013 The quotgreat rotationquot is the term being used to mark the move by investors out of bonds and into stocks. And yet, from my perspective, the rotation that seems to be on everyones lips these days is really not happeningmdashyet. According to ICI, the fund industry trade group, investors added almost 24 billion to stock funds in the first couple of weeks of January. But they also put nearly 20 billion into bond funds. So, the quotgreat rotationquot sounds like a lot of spin to me. On the other hand, how about a mini rotation, or what investors commonly call ldquorebalancingrdquo Does shuffling around your stock or bond allocations to maintain a specific portfolio balance really improve your returns or slash your risk I donrsquot think so, and Irsquoll show you why. One factor is persistence of performance, the driving force behind my Hot Hands strategy, another topic I cover in detail in this monthrsquos issue. That said, you donrsquot want to overdo it when it comes to momentum. Even boring assets like money markets, despite a lousy three years, still have a place in our portfoliosmdashfor now. Proposed regulations may put them under threat, but Irsquoll keep you apprised. Meanwhile, if yoursquore wondering how the new tax rules might affect the attractiveness of tax-exempt funds for those in the higher tax brackets, Irsquove adjusted the tax-equivalent yield calculations in the Performance Review to assist you. Read More January 2013 Investors typically face the turning of the calendar year with thoughts, projections and expectations about things like earnings, interest rates and maybe a resolution or two about becoming better, smarter money makers. But although the economy is growing and corporate earnings continue to ratchet higher, we come into 2013 with consumer confidence fading and Wall Street pondering the impact of the fiscal cliff and the destructive dysfunction that characterizes our policymaking bodies in Washington. The glum reality is that we enter 2013 full of uncertainty, as I note in my Outlook this month. But therersquos always some uncertainty in our lives, and right now I think itrsquos acting as the catalyst for investors to do things that arenrsquot in their best interest. Irsquoll show you how to avoid falling into that trap. I may not get everything right, and I fess up to that in my Report Card . but I can help keep you stay the course in the face of wild predictions that unfortunately the rest of the media rarely goes back to review. Irsquove aired a few of last yearrsquos in the issue. Whatever you do, be sure to make the most of your IRA this year, and send in any last-minute 2012 contributions before the April tax deadline. While management changes continue at Vanguard, yoursquoll still be in good hands with the managers of our Model Portfolio funds. Finally, if you missed it earlier today, you can find the 2013 Hot Hands fund in the issue. Read More December 2012 December 3, 2012 With the calendar ticking down to yearrsquos end, policymakers are battling over taxes on the richest Americans and the option of falling over the Dec. 31 fiscal cliff, which could be much more devastating to our collective health. But if nothing is done and tax rates shoot higher, are you really better off taking gains now to lock in lower tax rates Find out in this monthrsquos issue. Meanwhile, High-Yield Corporate has been closed since May 24 because of heavy cash inflows. Could it reopen, and if so, is a change in management in store Irsquoll tell you what I think and why. And speaking of hot money, the October Hot Hands strategy comes out on top a lot more often than you might think, as Irsquoll show you in my analysis. But remember that a momentum strategy like Hot Hands is not the same as timing the market. Market timing is a foolrsquos errand, but people keep trying to do it, particularly as they see market volatility heating up. A few numbers on the randomness of market gains may help you avoid making the same mistake. Read More November 2012 November 1, 2012 October would have been an eventful month even without Hurricane Sandys devastating blow to the Northeast. Vanguard dropped a bomb on the indexing industry with the news that it would begin transitioning over 20 of its funds to indexes from CRSP and FTSE in 2013. Vanguard also launched Short-Term Inflation-Protected Securities Index . the first of six promised bond funds over the last few years to actually make it to market. And while stocks backtracked on the wholly expected news that earnings growth in the just-ended third quarter was not as robust as in previous quarters, numbers on everything from housing to retail sales to durable goods orders suggested improvement, rather than deterioration, in the state of our economy. Im capitalizing on that with a change to three of our Model Portfolios Ill tell you about in the issue. Also in the issue, I talk about the 25th anniversary of Black Monday this past month and what the next 25 years might bring. As Mark Twain was reported to have said, History does not repeat itself, but it does rhyme. I also remind you about my Tech Winter strategy and how I recommend playing this seasonally strong time for technology stocksmdashand what may make this Tech Winter a little weaker than were used to. Read More October 2012 You can be excused for feeling buffeted by conflicting data. September is historically the worst month of the year for stocks, on average, but not only did this one turn out pretty well, it was also an extremely meek month, featuring some of the lowest volatility weve seen in years. While the overall numbers on job creation remain low, business hiring continues to expand, even as the manufacturing sector shows signs of a big slowdown. While many investors (maybe I should say traders) cant see past Novembers elections, this seems like an opportune time to think longer term about how my Model Portfolios are positioned and why the managers (and funds) Ive recommended continue to be my top picks for the road ahead. Also in the issue this month, Ill tell you the real story behind the so-called quotdeathquot of buy-and-hold investing. Ive also got a lot to say on the career of Ed Owens, manager of Health Care . who announced early last month that hell be retiring and handing the reins for the fund over to his co-portfolio manager Jean Hynesndashand just as much to say about the future of the fund. And finally, youll find some good news and some sad news from the members of the team that brings you this newsletter in the issue, as well. Read More September 2012 September 4, 2012 Batten down the hatches. No, Im not talking about hurricanes, though Isaac did leave a bit of devastation in its path. While its been a wonderful summer, with the stock market jumping rather than tumbling, I dont think September will be as benign. Of course, Im not suggesting you go to cash and head for the hills, but I do think you have to be mentally prepared for crosswinds and headwinds. And for those of you who hold foreign funds, dont forget that several of them start paying quarterly this month, rather than annually. Ive got the updated list of funds distributing for you in the issue. Also in the issue this month, as promised, are details on how Vanguards board of directors are investing in the funds they oversee. Had their own fortunes been subject to some of the long periods of underperformance or horrendous losses funds like U. S. Growth and Growth Equity produced, maybe they wouldnt have taken so long to make the necessary changes. But will their firing of AllianceBernstein from Global Equity . International Value and Windsor this past month make a difference for those funds Get my take, along with an insightful interview with Dividend Growth manager Don Kilbride, in the issue. Read More August 2012 Not alls right in the world. Europe is stuck between a rock and a hard place. China, a key engine of global growth, is no longer firing on all cylinders. Violence in the Middle East is threatening global energy supplies, again. And yet, in a very unscientific scan of the headlines, investors seem to be shifting their focus to the U. S. where the opportunities are better and markets are stronger. In this months issue, Ill show you what I see on the horizon for the U. S. economy and stock market, and give you my take on each of Vanguards foreign offerings as well. Over in the fixed income space, though, is Vanguards proposed Short-Term Inflation-Protected Index (and ETF) an inflation fund or a money-market alternative Vanguard isnt exactly saying, and frankly, given their recent track record with fund launches, it may never see the light of day. And thats not all they have to be embarrassed about: The disclosure of how Vanguards managers invest is rife with unanswered questions, and I for one wont stop asking them, no matter how much Vanguard hates it. Read More Momentous decisions on health care and euro-zone bailouts capped a tumultuous June that saw its share of market ups and downs and renewed fears of a summer slowdown. But despite all the sturm-und-drang across the pond, investors need to know that investing overseas can be a worthwhile endeavor, when not taken to extremes. In this months issue, Ill explain how. And for a more reasoned view of the markets, check out my interview with Selected Value and Windsor II managers Jim Barrow and Mark Giambrone. Meanwhile, baby boomers are not going to take us over what I call the demographic cliff pundits and gurus have been shouting about. Likewise, for Vanguard investors, the passing of a long-held baton at Vanguard, with Tim Buckley replacing Gus Sauter as chief investment officer, is less than meets the eye. Though, of course, Vanguards Partnership Plan continues to be very profitable for its executivesndashmuch more so than 500 Index . And speaking of performance, when it comes to determining when one fund is outpacing another, nothing beats a good relative performance chart. Check out the issue for more. Read More quotSloppy. quot Thats how J. P. Morgan Chase CEO Jamie Dimon characterized his firms 2.3 billion loss on bad derivatives bets. And you could describe the Facebook IPO, European markets and trading activity over the past month the same way. For the month, the Dow index lost 6.2, while the SampP 500 index fell 6.3. In this months issue, I tell you what to make of the markets ups and downs, not to mention the myriad balanced funds youll find at Vanguard. Meanwhile, if the closing of High-Yield Corporate left you out in the cold, Ive got an alternative for you. Of course, with the passing of World ex-U. S. SmallCap s third anniversary, not to mention the half-year point for October Hot Hands . we can get an idea of how these strategies have been stacking up. But dont forget that semiannual distributions are coming up. Vanguard may be a little mixed up about just which funds are distributing, but Ive got the full story for you in this months issue. Read More If it werent enough that everyone and their brother is recycling their quadrennial research papers on election cycles and market cycles, its also the beginning of May, when that old Wall Street market-timing chestnut recommending investors sell in May and go away rears its ugly, and wrong-thinking, head. Ill tell you my thoughts on it in this months issue. Meanwhile, Vanguards STAR LifeStrategy line and the series of Target Retirement funds sure seem like a simple solution to the complex problem of retirement investing, but prove to be a bit more complicated and fraught with problems in reality than in theory. You can do better, and Ill show you how. On a more somber note, Howard Bernard Schow of PRIMECAP Management passed away early last month. While this is a great loss to all who knew and respected him, I believe his legacy will live on for a very long time. Finally, the issue wraps up with answers to a few of your questions, and a recap of last weeks trades in the Model Portfolios that so many of you were asking about. Read More April 2012 As 2012s second quarter begins, there are a number of healthy debates taking place. First, what will happen with Obamacare, and how will it affect health care stocks More broadly, with pundits raising concerns about receding profit margins, are stocks in general destined to decline In this months issue, Ill show you a better way to assess the prospects for stocks, and why I think prices remain at reasonable, not feverish, levelsndashthough I wouldnt say an Apple a day is the right prescription for todays market. But while the focus recently has been on the astounding jump in three-year equity returns, now that the 20082009 market debacle has dropped from the numbers, whats really amazing is just how efficient funds were over the same period. I had to double-check my math. Speaking of which, Vanguard might want to check theirs, because I dont agree that moving the Managed Payout portfolios from Intermediate-Term Investment-Grade to Total Bond Market was a good idea in todays low-yield environment. And while that same low-yield environment is making money markets look pretty unattractive, I believe Vanguards are safe, and an important tool in managing a portfolio. Read More March 2012 After a volatile year when stocks moved full circle and, in the end, generated virtually no gain, the first two months of 2012 have been downright torrid, with Total Stock Market up a nice 9.6, Total International up 12.8 and Total Bond Market up 0.8. But dont get too excited about this months 3-year numbers. With the last month of the bear market falling from the calculations, looks can be deceiving. Meanwhile, sector investing is hotndashor at least whichever sector is hot for the moment. Should investors stick lots of money into Vanguards sector funds and ETFs Im not a believer. See why in this months issue. And while youre at it, find out how you can help the teens you know get started on the way to a financially secure retirement. Read More February 2012 February 1, 2012 If you needed any evidence that timing the markets ups and downs was pure investment folly, you didnt have to look any further than Januarys turnabout. Last years worst performers were some of Januarys best. Will the rest of the year follow suit It might, though Im not betting on it. Still, there is one persistence of performance strategy that has outperformed over the long haul. I call it Hot Hands . and Ive got a full update for you in this months issue. Meanwhile, while Vanguard has been playing manager musical chairs on Growth Equity and Windsor II . the question remains whether the changes have really helped shareholders. Read my stories on both funds to see what I think. Finally, with ongoing problems in Europe, should we simply stay within U. S. borders for our portfolios Check out my interview with Virginie Maisonneuve, co-manager on International Growth . to find out. Read More January 2012 Happy new year, and welcome to another year of independent thoughts, commentary and the like on the goings-on at Vanguard. If theres one thing Im sure of, its that 2012 will find investors more than a little uncertain about just where the markets are headed in the months ahead. But the uncertainty about things like Europe, the U. S. housing market, Chinas expansion or contraction, and a plethora of other issues will also be tinged with questions about a much more basic portfolio question: Will many investors continued focus on bonds and bond funds soon come to an end Ive laid out my expectations in this years Outlook . Of course, I wasnt right about everything last year, but unlike most pundits, that wont stop me from providing an annual Report Card on both my hits and my misses. Meanwhile, theres still time to take advantage of this years Hot Hands fund, and to maximize your IRA contribution for 2011 before the tax deadline. Find out how in this months Independent Adviser . Read More December 2011 December 1, 2011 This December 2011 issue marks 21 years since I began reporting, independently, on all things Vanguard. Here are a few things to look out for this month: Vanguard plans to introduce two foreign bond funds for the first time in the U. S. in early 2012. One is based on a global (ex-U. S.) index and looks to be fairly plain-vanilla. The other is based on an emerging markets bond index and is high-octane from many perspectives. Take a look at my analysis on page 1. Also, as I promised last month, I have all the details on the October Hot Hands strategy. The original Hot Hands is a favorite of many Vanguard investors, and the October version is a particularly attractive off-shoot of it. Finally, Ive got plenty of tax talk in this issue, from the value of losses when it comes to end-of-year planning, to the full calendar of distributions, both on page 12. As always, if youre investing in a taxable account, dont buy a fund just before its distribution. Enjoy, and happy holidays. Read More November 2011 November 1, 2011 In this months issue, I delve into Vanguards best growth and income funds which, as a family, are home to some of Vanguards largest and best-known indexed funds. But, despite what the index purists say, you can still find great active managers and, moreover, cases where they put the index products to shame. For the active funds to buy, and the reason why you wont hear Vanguard promote them, read this months Funds Focus. Plus, active funds with heavy tech weightings tend to beat their passive investment counterparts during the seasonally strong Tech Winter . when tech stocks typically show good relative strength. Why is technology historically hot during these coolest of months Youll find the answer, plus my recommendations on how to best navigate this quotwinter, quot in this months issue. On the other hand, if youre an income investor looking for a bit more stability, Ive got an update on my Alternative Income Model for you. Read More October 2011 This month, Im recommending a trade in two of my Model Portfolios in order to embrace a portion of the bond market that has become decidedly more attractive in recent monthsmdashthe high-yield, or quotjunkquot bond market. Also this month, diversification and risk-reduction go hand-in-hand, but what you get is not always what you see. Are you sure you are properly diversified Is there an optimal diversification Check out the article on page 4 to make sure you are striking the optimal balance for your needs. Plus, dont miss my in-depth interview with Don Kilbride, manager of Dividend Growth fund we discuss his take on the markets recent machinations and why his portfolios have withstood the current malaise. Read More September 2011 September 1, 2011 Consumer confidence may be a great indicator for the media to weave a story around, but its not a great indicator of where the stock market was, is or should be. Savvy investors such as you and I are better looking at what consumers are doing, not what they are saying. Check out this months charts to learn how to make sense of these roller-coaster markets. Of course, Octobers coming, so be prepared for the dire warnings of market declines that herald its arrival. Armed with the statistics I detail on page 7 of this months issue, you will sleep better at night. Plus, learn about two mid-cap growth funds that remain among the best Vanguard has to offer, and check out the share class QampA for what to expect from Vanguards next batch of Admirals. Read More August 2011 The 14.3 trillion debt-ceiling paralysis, and related posturing and grandstanding over our budget deficit, was the spectacle of July, with our domestic woes supplanting concerns over Europes ongoing debt crisis. Yet, despite all of the handwringing, there are still profits being made and attractive funds out there, especially some large-cap growth funds. In this months issue, Ill clue you in on what to look for in a growth fund and explain why you should have one in your portfoliondashpreferably through the PRIMECAP management team. For an inside look at the tax-exempt world, I bring you an interview with Pamela Tynan, who leads Vanguards short-term muni group and manages both the Tax-Exempt Money Market and Short-Term Tax-Exempt funds. Finally, I predict that stock fund returns are going to skyrocket in the coming months check out the August issue to find out why you should be wary of the numbers. Read More The quotGreat Recessionquot officially ended two years ago, but given the day-to-day headlines and market gyrations, that may be hard for investors to believe. Even though the market has taken a downturn for the summer, Total Stock Market Index has gained 6.3 for the year to date and our Model Portfolios are up between 5.6 and 7.7. And with GDP at an all-time high, we are making headway. In this months issue, I bring you highlights of the current crop of shareholder letters, with many fund managers optimistic that the economy is on the mend, albeit slowly. For one fund, I think an upgrade is warranted, while another has gotten too choppy to remain a Buy. But should you lose sleep over PRIMECAP Managements holdings in Research in Motion (RIMM), or Vanguard money markets exposure to Greece I dont think so, and Ill tell you why. Money market yields continue to plummet, however, making short-term bond funds, such as Short-Term Investment Grade . a good alternative. Also, with heavy legal oversight, Vanguard bloggers might not face an Anthony Weiner moment anytime soon, but is this social media experiment worth the effort Check out the July issue and see what you think. Read More May served up a month the likes of which we havent seen since August 2010mdasha loser. The Dow index lost 1.9, the SP 500 index feel 1.4 and the NASDAQ Composite dropped 1.3. On the other hand, May was a big winner for stock investors who focus on one-year numbers. The market ( Total Stock Market Index ) is up 27.2 over the past year. But at the end of April it was only up 18.4. Watch the numbers, because theyre poised to rocket even higher next monthmdashbut read this months issue before you read too much into them. Also in the issue, find out where Vanguards directors invest their own money. You might be surprised at who has the biggest, or smallest, stake in Vanguard funds. Meanwhile, with bond bear market sightings growing with every passing week, this months Fund Focus puts the spotlight on the risks and opportunities available in Vanguards taxable bond funds. As for equities, for almost two decades, Ive been a big believer in Health Care . one of the best funds in the investment marketplace, and weve made lots of money sticking with it. But has the new health care legislation changed the game Check out my interview with managers Ed Owens and Jean Hynes to find out. Read More Brick by brick, Wall Streets proverbial wall of worry is building higher. Yet markets continue to climb up and over. April marks the eighth month in a row of positive stock returns here at home. Will the markets make it nine Odds arent stacked in our favor. That doesnt mean that investors should give up or give in. Were already seeing the inklings of a rotation in the market that suggests reality is setting in for those with a nose to the winds of change. And speaking of changes, there have been some notable ones at Vanguard lately. First, more details have emerged on the new Emerging Markets Select fund slated to launch in June. Second, Vanguard just announced its folding its Tax-Managed funds into Admiral Tax-Managed funds, with fewer fees and reduced minimums. Finally, Vanguards new ETFs have changed the way we can look at the host of aggressive growth funds available to us. You can get my take on all of them in the issue, along with answers to your questions and some tips to help your children or grandchildren save for their future. Read More April 2011 Worries about the municipal bond market appear to have faded as investors have turned their short-term focus to other things like, well, Libya, Japan, Egypt or any of the other hot spots around the globe. It wasnt too many weeks ago that the tax-exempt bond market was going to be the next investment Armageddon. Read this months issue to find what to do when it comes to Vanguards tax-free funds. Speaking of which, April always brings my thoughts back to taxes, so I thought it would be good to take another look at tax efficiency, the measure of just how much of a funds returns you get to keep after the IRS gets through with you, and what you really should be looking for in a fund. No, its not low turnover or an ETF structure. Also this month, do you want to know who is eating their own cooking Read this issue to find out the appallingly low number of outside managers who actually invest in the Vanguard funds they run. Read More March 2011 If youre unfamiliar with Peter Higgins, 49, or David Palmer, 39, thats probably because theyve kept a pretty low profile over their investment careers. The two Wellington Management portfolio managers are, however, the brains behind Capital Value, which has been a standout performer after years of lousy returns. But how have they achieved this dramatic turnaround, and should you buy the fund Get my full interviews with both managers in this months issue. Meanwhile, Vanguard has always made a public point of sticking up for the little guy, right Turns out that when it comes to providing a simple service to help you vote your proxies, Vanguard may not be so shareholder-friendly. Finally, the first quarter is a great time for all of us to review our portfolios. In this issue, Ill tell you about all of my favorite funds at Vanguard and why I use them in my Model Portfolios. (Does Capital Value make the cut) I think my philosophy that you should quotBuy the manager, not the fund, quot holds up quite nicely as the numbers bear out. As youll see, over the 20 years that Ive been writing this newsletter, you and I have generated market-beating returns with less-than-market risk. Read More February 2011 February 1, 2011 You can spin the economic and market news pretty much any way you like, but sheer numbers dont support many of the theories. Vanguard investors simply are not standing in front of a speeding train, and uncertainty doesnt mean we should reach for the sell button. That said, there are some questions worth examining. For instance, is Vanguard fixing to offer a foreign or global fixed-income fund in the near future Yes, I think so. In fact, Vanguard may be working to develop two foreign bond funds, one which focuses on developed markets and one for emerging markets. Read what I have to say about a recent Vanguard paper on the pros and cons of foreign bonds. And while you look over your shareholder reports, dont forget to look beyond mere performance to the managers responsible for it. If you take the chairmans letter for MidCap Growth at face value, youll miss an important point. Plus I have an update on the Hot Hands fund and the methodology I use for selecting the fund. Ill show you how over the long haul, this strategy soars like an eagle, while other strategies drop like turkeys. Read More January 2011 Most market pundits, economists and investors got it wrong last year at this time, suggesting that the economic recovery in the U. S. would be long and slow. The fact is that the recovery has, in many ways, been a very strong rebound off the bottom of a horrible economic retrenchment. We are starting to see a very strong series of economic data points that suggest to me that the economy will grow to record levels in 2011. Read this months issue to find out why Im so optimistic. Plus I have my yearly review and my 2010 Report Card, as well as an interview with James Barrow and Marc Giambrone, partners and portfolio managers of Windsor II and Selected Value. Both are fairly optimistic about the next year or two, though they do have some concerns. Finally, as you continue to build your retirement savings, make sure youve contributed the full amount for 2010 before you contribute for 2011. Read More December 2010 December 1, 2010 Phew, Im glad thats over. Was it the 8-month, 600 billion QE2 controversy, the disfunction and obfuscation leading up to the midterm election just four weeks ago, or the fact that the U. S. economy was reported to have grown 2, then 2.5 in the third quarter, which had investors ping-ponging from optimism to pessimism and back Whatever the cause for the schizophrenia, the evidence is piling up that the U. S. economy is back on its feet, and things are looking a whole lot better than they did in December 2009. And thats not all thats back on track: After a miss in 2008, last years October Hot Hands fund returned 23.8 over the next 12 months. Even if you bought my alternative funds, you still beat the market by a nice margin. Read this months issue to find out what the October Hot Hands strategy can do for you. Meanwhile, something is going on at Explorer, with the fund once again trimming names. But will this improve performance Finally, dont forget: Year-end distribution season is right around the corner. If youre making some trades to avoid distributions andor to realize losses in your taxable accounts, you need to know these dates. But dont let the tax tail wag the portfolio dog, or base your trades on best funds lists like those at Morningstar. There are better ways to choose market-beating funds. Read More November 2010 November 1, 2010 Make way for the QE2, which is sailing through Wall Street and is expected to arrive this Wednesday The prospect of QE2 wasnt the only thing making waves this month, though. First Vanguard dropped the minimums on scores of Admiral funds. And they also dropped the bomb directly on AllianceBernstein, firing the management team from its position at the helm of U. S. Growth. Read all the details about their firing and the new management team in this months issue. This months fund focus covers Vanguards variable annuity family. To my mind, theres little question that Vanguards annuity program is one of the best in the industry, because their fees are among the lowest in the business. All in all, annuities look like a great retirement investment option. The problem is, theres a lot less here than meets the casual eye. Plus, after repeated requests for a portfolio focused solely on Vanguards ETFs, Ive come to the conclusion that my best option is to shift the Growth Index Model Portfolio to an all-ETF format rather than add yet another Model Portfolio to the mix. Read More October 2010 Bond market risk is rising. Investors whove been plowing money into bonds and bond funds, while virtually ignoring stock funds, think they are reducing risk in their portfolios by focusing on bonds. I think theyre making a big mistake. It always surprises me how many investors simply dont get the bond market. Its not for lack of trying. But I think a couple of factors work against easy comprehension. Read this months issue to get some clarity about the bond market, gain a better understanding of where risks await, and learn where to find better values and safer alternatives. Also in this months issue: Vanguard made a significant addition to its website with the launch of Vanguard Annuity Access, a fixed annuity supermarket. While it may put more power into the individual investors hands, will Vanguard be able to help you determine if these complex investments are right for you, and if so, which ones Plus, I have a review on the new Standard Poors and Russell ETFs launched by Vanguard, and an alternative income portfolio to offer for those of you looking for something even more conservative than my Income Model Portfolio. Read More September 2010 September 1, 2010 The glory of Julys rousing rebound turned to mush in August as the Dow fell 4.3, the SP 500 index fell 4.7, and virtually every other major market index took it on the chin while bonds boomed. Disheartening, yes, but I think the markets and the economy are taking that veritable pause that refreshes. This months Funds Focus puts the spotlight on foreign investment. Though investing in foreign stocks provides another important element of diversification to a portfolio, there are inherent risks to be aware of. Read this months issue to find out which international funds you should sell or buy to safely maximize your potential returns. Also in this issue is an interview with Wellingtons Edward P. Bousa. He gives us his perspectives on bubbles and busts, and the current economic outlook. Read More August 2010 Last month I told you I was skeptical that adding a second manager to International Explorer was going to be an improvement, and was putting the fund on my watch list. This month I want to expand a bit more on this, particularly since Ive now been able to get hold of data that allows an apples-to-apples comparison of the two managers portfolios at the exact same point in time. Also, in June, you and I reviewed Vanguards wide array of life-cycle fundsmdashthe Target Retirement funds and the STAR LifeStrategy funds. As you know, I find most of these funds lacking. A better choice might be one of the good old balanced funds that have served Vanguard investors so well. Read the issue to find out which ones you should buy, hold or sell and when it may not be redundant to hold more than one. Speaking of redundancy, I also touch on Vanguards plans to offer 19 new ETFs that, for the most part, really dont add anything new to their lineup. There are a few things that others havent focused on in the discussion of this announcement. Read More Its that time of year when our mailboxes (both postal and email) are filling with semiannual reports from a multitude of Vanguards funds and managers. I thought youd find some of their comments enlightening and encouraging. On the whole, Id say cautious optimism is the theme that runs through these reports. Read this months issue to get a sampling, along with my opinions and recommendations. Also, read how converting to a Roth IRA is one of the best deals I think you can make for your retirement future. But you have to do it this year. Plus I have an interview with Edward Hocknell, a member of Baillie Giffords investment policy committee. You will be pleasantly surprised by how optimistic he is and why. Read More Ill say this for life-cycle investing: For something that was supposed to be a simple and fool-proof investment strategy, life-cycle funds like Vanguards STAR LifeStrategy and Target Retirement funds sure turned out to be complicated and fraught with problems, not the least of which were huge, unexpected losses suffered during the last bear market, which was the first bear for most life-cycle funds and shareholders. So who are life-cycle funds made for Read this months issue to find out if any are right for you or if you should stay away from them entirely. And what about your 18-year-oldmdashare you considering their retirement You may think Im kidding, but Im not. Roth IRAs and the strategies for converting your traditional IRA into a Roth are big news right now. But the story youre probably not seeing is the one that most of the press continues to miss: Helping your teenage child, grandchild or even friend begin the long road to retirement on the proper foot. Plus, this month Ive got an interview with Wellington Managements Don Kilbride, a true managers manager. He may not trade a lot but he generates solid returns in choppy markets. Read More Often thought of as the Rodney Dangerfields of the investment world, money market funds usually get no respect. Theres nothing sexy about a fund where the price never changes and all you earn is an incremental bit of income day in and day out. Thats particularly so today as yields have fallen so low that many firms, Vanguard included, are doing all they can to simply keep them above zero. But money funds do serve a purpose read this months issue to find out why. Also in this issue I thought it would be worth taking a moment to reflect on the still-early earnings season and the run-up in stocks that has preceded it over the past year. Many commentators are arguing that because the markets have risen so much already that they are bound to fall dramatically. Their analysis, if you can call it that, is simplistic and foolish. Read my analysis to find out why I believe this decade will belong to the stock market. Plus, this month Ive got an interview with Virginie Maisonnueve, an international growth-stock manager with a unique approach. Read More April 2010 The world didnt come to an end with the signing of the historic health reform bill on Mar. 23, nor did the markets. In fact, March 2010 put a nice cap on the first year of the stock markets rebound since the Mar. 9, 2009, closing low. Speaking of health care, this months issue is focused on sectors. When it comes to investing in very discrete sectors of the stock market, your results can be profitable, unprofitable or downright ugly. Should you really be investing in sectors In most cases the answer is no, though there is one sector that I encourage investors to buy. Plus we have an interview with one of Explorers hottest portfolio managers, Ken Abrams and we get an idea of what hes seeing in the small cap sector. Meanwhile, what is Vanguarding Are the new marketing claims accurate or is it simply dollar-cost-averaging Read More March 2010 Februarys markets were marked by an outbreak of swine flu as Greece, one of the European Unions so-called PIIGS (Portugal, Ireland, Italy, Greece and Spain), was thought to be near default on its sovereign debt. Meanwhile, Spain reported its seventh straight quarter of declining GDP, which doesnt look particularly promising when compared to strong rebounds in, say, the U. S. (where revised figures showed a 5.9 annualized gain in Q4), Japan or even France. In this months issue, though bonds remain popular, there is plenty of risk ahead. You need to be prepared for the eventuality of the Fed raising rates, and if youre spending your distributions, what can happen to your initial investment. And in this months Funds Focus I review the Growth and Income category, specifically index funds versus actively managed funds and which options I believe are best for you. Plus I have a tuition tutorial on 529 plans. In the time since I last covered these plans, Vanguard has made some changes to the ones it directly administers, and more states are now offering the companys funds in their plans. Read More February 2010 February 1, 2010 If January is any indication of what the year will bring, were in for a volatile ride. While 2009 didnt look anything like 2008 in terms of the sheer number of days that the markets swung in wide arcs, were off to a pretty wobbly start for 2010.Though this is the beginning of the roller coaster, there are positive signs ahead. This months issue has a review of our Hot Hands fund strategy and alternative investment options for you to consider since this years fund is closed. I also have an update on Vanguards three Managed Payout funds, which were launched in 2008 with great fanfare, but are now barely treading water. Ill fill you in on why investors are not buying into the concept. And I have an interview with Robert F. Auwaerter, head of Vanguards bond shop, where we discuss the current state of the bond market and the consequences of investing in funds like Inflation-Protected Securities. Finally, Vanguard has added yet another manager to one of its already full funds, and well, you know how I feel about that. Read More January 2010 One year ago, those who ventured a prediction that we might actually be seeing light at the end of the dark tunnel that was 2008 might instead have been just seconds away from a collision with an oncoming freight train. Indeed, the first two months of 2009 heaped misery upon misery. But then, the markets turned, and as my annual scorecard makes clear, we saw gains across most boards in 2009. This months issue is jam-packed with my review of 2009 as well as my outlook for 2010. Though worries abound, the market continues to climb. So how should we position our portfolios for the coming year The answer is easier than youd think. I also share some lessons Ive learned from 2008 and 2009, and what we can do about them going forward, plus answers to a few of your questions on bonds. Finally, as you rebuild your retirement savings, make sure youve contributed all you can for 2009 before you contribute for 2010. Read More December 2009 December 1, 2009 Saying he was making an all-in wager on the economic future of the United States, Warren Buffett bought Burlington Northern Santa Fe at the start of November. Other deals followed, as merger and acquisition activity has begun to heat up on the backs of what appear to be good values and low borrowing costs. Speaking of momentum, my October Hot Hands strategy is back on track, if only by a little. How it will perform over the next 12 months will be very, very interesting, especially considering the fund managers rapid-fire trading. Also in this issue, I talk about one of the more embarrassing, or at least one of the most distressing, periods in Vanguard history, as one of the companys money market funds lost money in the third quarter while another required a waiver to keep returns from going negative. And year-end distribution season is right around the corner. If youre making some trades to avoid distributions andor to realize losses in your taxable accounts, you need to know these dates. Plus, I have an update on the debut of the new Vanguard sector bond funds. Read More November 2009 November 2, 2009 Despite all the ghoulish predictions for October, the month was neither trick nor treat. Investors on a sugar high battled with those that hadnt yet drunk the recovery Kool-Aid . and in the end they came to a draw. While Vanguards funds may not be socking you with large capital gains in December, that doesnt mean there arent still opportunities to whittle down your tax bill for 2009 using losses you may have on your books from last year, or earlier this year. Also, in this issue, I take a look at PRIMECAPs Odyssey fund family and how they compare to Vanguards PRIMECAP funds. And youll want to read this months interview with Jim Barrow and Mark Giambronemdashas Ive said repeatedly, and they agree, its the top line we need to look at for a sustainable recovery. Speaking of which, were just beginning the period when tech stocks traditionally post their best numbers. The question is, will this years Tech Winter be a warm one Read More October 2009 Despite long-standing historical precedent, and fears flamed by a hysterical press that September would prove to be the end of or at least the first major roadblock to market recovery since the March 9 low, the month ended with gains across all indices. But were not in the clear yet. There are some signs we should look for ahead. Looking at Vanguards funds, no doubt youve noticed that Capital Value s been on fire this year. What is driving this momentum Read my analysis in this months issue to find out whether or not we should be joining the party. Finally, do you know what makes a growth fund a growth fund I consider a growth fund one which focuses on capital appreciation with little or no regard for generating yield. But what distinguishes one growth fund from the next is the individual manager running the fund, the funds objective, and how the manager is meeting the objective. In this issue, I take a look at Vanguards growing product line of good, bad and ugly growth funds. Read More September 2009 September 1, 2009 Yes, it appears the worst recession you and I have ever experienced is probably on its last legs. Act I was truly a disaster of epic proportions. But that doesnt mean were in the all-clear. While the housing market appears to have hit bottom, profits have begun to rebound, inflation remains virtually nonexistent, big banks are improving their balance sheets and investor buying power remains formidable, but a litany of issues remain to keep optimism in check. But I believe we should continue to focus on what we do know versus what is only conjecture. What you and I know is that by building portfolios of funds run by solid investment managers, well be able to handle whatever surprises are thrown at us in Act II. I encourage you to read my interview with Health Care s Ed Owens to get a sense of where this sector of the market is headed in the coming months and years. Also in this issue: In August, Vanguard closed one of the best-managed funds to new investors, but there is a private fund run by these same managers that is a tremendous option for you. And I give you my analysis of Vanguards enormous new foray into bond indexing. Read More August 2009 Uncertainty is the only certainty on Wall Street these days. Those who see inflation around the corner are clashing with those who fear deflation. Bond markets are rising and falling on interest-rate expectations, with the 10-year Treasury bouncing swiftly from near 3 to near 4 and back. Housing stats look better, but consumer confidence looks worse. And while the preliminary estimates for second-quarter GDP showed a mere 1.0 decline, revised first-quarter numbers looked worse. Optimist or pessimist, Im fairly certain weve found a bottom in all things but employment. Weve had a great few months since the markets bottom in March, and I expect more to come. But before you put on your party hat, you need to be prepared for anywhere from a 10 to 15 decline at any time. Reading between the lines, Id say Vanguard is well on its the way to introducing an quotabsolute returnquot fund into the mix. Read this months issue to find out why I believe this is going to happen. Also in this issue, Ive got answers to some of the questions youve sent me and more on the latest semiannual reports. Read More You could say that June 2009 will be remembered for being bookended by the fall of some of the largest icons in the business and entertainment worlds. As for us, right now you and I, and the markets, are in something of a waiting mode. Weve had a big run from the markets lows in early March. Both the Dow and the SampP 500 are up since their March lows, and expectations are that the economy is starting to heal and corporate profits will follow. Read this months issue to find out where some of Vanguards outside managers think were headed and how this is a good time to buy. Im sticking with the tried-and-true and staying away from the multi-multi-managed funds. In the closed-fund arena, if youre worried about being locked out of the Treasury Money Market funds, dont. You dont need multiple choices to feel safe. And check out my interview with Matt Dobbs, lead manager on International Explorer and co-manager on International Growth, to find out what he thinks about foreign small-caps in this economy. Read More Despite the fact that stocks markets recorded their third straight up-month in May, prevailing sentiment still seems to be leaning toward pessimismmdashif not outright doom and gloom. I dont buy it. I dont think were headed into the abyss. But I do think that our expectations need to be reset. No longer will stocks and bonds give us outsized gains with undersized risks. And yes, you really do have to save for your retirement. Read this months issue to find out where I believe were headed. Plus I have the second part of the Roth IRA storymdashhow more of you are going to be able to reap the benefits of it in 2010. Also check out my interview with Wellington Managements Don Kilbride, manager of Dividend Growth, to learn how he finds dividends in a down economy. I also have answers to some IRA questions and more info on our May trade of Global Equity. Read More Ill let others comment on the Presidents first 100 days in office. Me, Im looking at the first 37 days since the stock market hit its bear-market low. Since then weve seen the Dow Jones Industrial Average go up, 500 Index is up and our Model Portfolios are up. Were slowly and prudently rebuilding our wealth. Read this months issue to find out about which funds may be your best dividend investment options when inflation rears its ugly head. There is also an interview with Michael Lee Hong, manager of High-Yield Corporate . and what changes are occurring within the high-yield bond market and why he remains bearish on the near future. And we have the first of a two-part story about Roth IRAs and why tax-deferred and tax-free savings accounts are a spectacular way to fund your retirement. Read More April 2009 Volatility was in the house during March. The good news is the month ended with an 8.7 gain. The bad news is that wasnt enough to erase the losses earlier this year. But a flicker or two of light in economic data may be pointing to a light at the end of the recessionary tunnel, though April will certainly bring showers with a dismal earnings season. Hear what Ford B. Draper Jr. recently added to the management team at Morgan Growth . has to say about the latest developments in my interview with him. Meanwhile, dont be spooked by the specter of higher costs at your Vanguard funds: The insight of Morningstars recent update about expense ratios leaves a few things to be desired. Speaking of insight, isnt it about time Vanguard led the way in improving disclosure regarding Director holdings in its funds, rather than giving vague categories like quotover 100,000quot Ill tell you whos eating their own cooking, and whos not. One thing you can be sure of: Many of the managers of our Model Portfolio funds are. Ive got updates on all of these funds for you. Read More March 2009 Will small stocks be the winners out of this markets bottom, whenever it comes Im not so sure. But Vanguards aggressive growth funds mix small-, mid - and even some large-cap stocks in the category. Get my profiles on each in this months issue. And yes, the markets down, but this is the perfect time to invest in an IRA for a working teen who has to report income. Ill tell you why, and how. Meanwhile, Vanguards Growth Equity fund is finally under new managementmdashthe old record, a horrible one foisted upon shareholders by the team at Turner Investments, is history. But is Vanguard keeping the SEC straight on just whos minding the shop at MidCap Growth . Theres some conflict between what their filings say and what their website says. Also, dont forget that March is quarterly distribution time for lots of funds, and supplemental distribution time for others. Find out whether your fund may be making a distribution soon. Finally, Vanguard has closed some bond funds overseas. Will they have to do so in the U. S. Read More February 2009 February 2, 2009 The year 2009 began with a rally that quickly reverted to declines as investors continued to worry about the extent to which the global economy has slowed. While it is easy to focus on the gloom of the day, theres another side Id like to mention: Change has come albeit slowly and at times almost imperceptibly. One change has been the narrowing of spreads between corporate bonds and Treasurys. Another change for this year is a new Hot Hands fund. Ive got a review of the strategy for you since its inception. There have also been many changes to funds, fund managers, and managers of fund managers, most recently at Growth Equity and in Vanguards Portfolio Review Department, and I have all the particulars in this months issue. I also give you a more detailed look at the reasons behind the trades we made at the end of the year and an update on our Model Portfolio performance. And I am pleased to announce that the 2009 Guidebook has been completed, and we are beginning to ship them. I hope you sign up for your copy today. Read More January 2009 Its a new year, and I for one am glad to put 2008 in the rearview mirror. That said, here are some highlights from this months issue. Morgan Growth is growing fat with managers. Does multi-management help You couldnt prove it to me. As for volatility, check out my tables showing how volatile the Dow really was in 2008. Looking ahead to 2009, Ive also got the 2009 Hot Hands fund for you. Ill have a full report on Hot Hands next month. And Vanguard is finally going to try to fix their brokerage business by taking all the inner workings internal, and taking it out of Pershings hands. Lets hope its a fix and not something that gets worse rather than better. Finally, beware of the Treasury bubble (Vanguards Extended Duration Treasury ETF gained 55 in 2008, most of it in just the last two months) and remember to take the forecasts of market pundits and economists with a grain of salt, as there is no crystal ball. Ive got a look at the past years news and a report card on my own calls over the year for you. Read More December 2008 December 1, 2008 Scoring a hat trick, or three consecutive goals, is generally considered a rare and wondrous thing. Unfortunately, in the current investment climate, the hat trick weve just scored is a rare and horrible three months of declining markets for virtually all asset classes. The numbers are astounding when you consider the worst losses suffered by most Vanguard funds in prior market declines. As youll see in this months issue, this one is taking virtually all Vanguard funds to new, record drawdowns, or maximum cumulative losses (MCLs). Also in the issue, I have an interview with James P. Barrow, lead manager on Windsor II and Selected Value . an update on the soon-to-be-closed Insured Long-Term Tax-Exempt and a look at the alluring yields of Vanguards tax-exempt funds. Meanwhile, out of this morass we may be able to see some clarity of purpose on the concerted efforts worldwide to get a handle on the credit crisis, get capital flowing again and put people back to work rebuilding our economy. Read More November 2008 November 1, 2008 October 2008 was a lesson in how investor fear and uncertainty replaces common sense and market discipline. There was no place to hide. (And as I anticipated, International Explorer has finally reopened, along with Precious Metals amp Mining .) Despite the drubbing, I remain convinced that the investment discipline you and I follow will serve us well into the future. If you missed the October 23 Hotline . see page 3 of this months issue for changes to our Model Portfolios . Also, on page 4 youll find an interview with Don Kilbride of Dividend Growth . Finally, I have some tax tips and updates for you on our October Hot Hands strategy, Tech Winter . and what managers of Vanguard funds are saying in their semiannual reports. Read More October 2008 September met all expectations, and then some, as the worst month of the year for stocks, as the financial crisis hit with full force. At the quarters close, the Dow is 23.4 below its recent high. Meanwhile, international stocks have been hit harder than domestics. So are they still good investments Dan thinks so. Speaking of which, Vanguard cut the Managed Payout funds allocations to foreign stocks, among other changes. But will they consider a hedge fund strategy to smooth out the funds returns Meanwhile, be wary of the talking heads on TV, and dont be fooled by the headlines to come saying bonds have outperformed stocks over the past decade. Capitalism isnt dead, and if you hang tight, our diversification in Vanguards top funds will pay off. Finally, stay tuned next month for Dans next October Hot Hands pick. Read More September 2008 September 1, 2008 With the latest GDP report showing 3.3 growth in Q2, rather than 1.9 as previously reported, and the continuing volatility in stocks, what should you make of this seesaw market Dans got answers to the questions youve been asking him starting on page 1 of this months issue. Meanwhile, the volatility is here to stay. Unfortunately, despite the recent manager changes at Vanguard, so is the AllianceBernstein team at U. S. Growth . By the way, if what Vanguard claims about the recent reopenings of Health Care and Explorer is true, why is International Explorer still closed And is Total Stock Market really becoming more popular than 500 Index . As Dan explains, that depends on how you look at it. Read More August 2008 When the going gets tough, a lot of investors get scared out of stocks. But even if youre retired, is that whats best for your money Dan shows why even for income-oriented investors, and even during tough times, stocks have a lot to offer for the long run. Of course, whether the latest management changes at Explorer . Windsor . and Capital Value will turn things around for those funds is another question. Dan interviews James Mordy at Windsor to find out what his plans for the fund are. Finally, if you havent heard the fuss about the U. S. stock markets lost decade, you probably will soon. But you dont have to worry: Thanks to Dans strategy of using top-notch managers in a diversified portfolio with the right risk characteristics, investors in the Adviser Growth Portfolio racked up three times the markets return over the past ten years, and a healthy 7.5 annualized return versus the markets 0.1 annualized return since the end of 1999. Read More Fear is the new buzzword on Wall Street and Main Street. While the second quarter started off fairly strong, June took it apart with big losses across the globe and both major U. S. indexes barely avoiding an official bear-market call. All of that might make variable annuities sound pretty good, considering the guarantees they come with. But whats the catch As Dan explains in this issue, it turns out there are plenty, though they can have their appeal. On a side note, just what is keeping U. S. Growth alive And will the presidential election determine the fate of the market Read Dans take to find out. Read More Two months certainly doesnt make a trend, but after the first quarter, its good to have a respite from the steady beat of lousy economic reports, lousy investor sentiment and, most importantly, lousy market returns. And thats not all thats different: Changes are afoot at Growth Equity, International Value, and possibly Health Care, not to mention the taxable gains funds may realize in 2008. (As for U. S. Growth, based on one shareholders correspondence with Vanguard Chairman John Brennan, it may be a touchy subject.) Finally, with warmer weather coming our way, its a great time to start thinking about helping your children start their own Roth IRAs. Read More With the market going down earlier this year, and back up just recently, its the perfect time for an early midyear review. Dan takes a look at the record highs in major indexes around the world, and how much it will take to get back to those levels. Speaking of foreign markets, could Emerging Markets be a safe haven Check out what Baillie Giffords Edward Hocknell has to say in this months manager interview. And with April 15 just past, no doubt taxes are on your mind. But forget tax efficiency, think after-tax returns. Dan reports just which Vanguard funds give you the best returns even after you pay your dues in this months issue, as well as special tax-efficiency tables in the News section of the website. Read More April 2008 When it rains, it pours, but investors in Windsor II need not fear. Dan explains how Jim Barrows prudent management protected the fund from the worst of Bear Sterns sudden decline. And while Vanguards value funds, including one U. S. investors may not have heard of, have suffered lately, its markets like these that give top managers bargains that pay off for patient investors. As you may recall, Dan reported last year on how investing in the right funds just after a big market decline can boost your returns. This month, he provides an update on how buying the 3.5 drop on February 27, 2007, has worked out, and what to do about any similar drop in 2008. Of course, if youre a Treasury investor, tax-exempt yields are presenting an opportunity you shouldnt miss, and if youre a retiree, Dan has a savings and withdrawal plan for you. Read More March 2008 As usual, Vanguard announced several fund manager changes in February. But thats not the only change: Vanguard will also have a new CEO. Dan discusses the implications of the new arrangements for Vanguard shareholders. Speaking of implications, does the 2008 volatility mean we should switch from stocks to bonds Hear what the managers of Selected Value and Windsor II have to say. Finally, dont forget that you have until April 15 to help your child or grandchild make 2007 IRA contributions. Its never too early to start planning for retirement. Read More February 2008 February 1, 2008 With the extreme volatility in January, will we see a major bear market in 2008 Dan explains why the panic-ridden headlines are misleading. But thats not all that needs explaining151for instance, why did reinvestment of ETF distributions take so long at Vanguard Brokerage And does anyone need the new MegaCap and upcoming Managed Payout funds Meanwhile, this years Hot Hands fund warrants caution, and you might be better off in some alternatives. Read More January 2008 2007 sure contained a few surprises, and as the new year begins, its a good time to see what we can learn in hindsight. Dan reviews the events of the past year, as well as how his own calls fared, and reveals his outlook for 2008. Some pundits are crying the R-word, but what exactly defines a recession And just where do the Feds responsibilities lie when things get dicey Dan answers those questions and asks a few of his own in an interview with Bill Ricks of AXA Rosenberg, the quant shop responsible for portions of Vanguard Explorer . U. S. Value . and its new Market Neutral fund. Speaking of which, Vanguard has introduced a slew of new funds in the past year, so dont forget to sign up pre-publication for the completely updated 2008 FFSA Independent Guide to the Vanguard Funds . Details can be found on page 16 of this months issue. Happy New Year Read More December 2007 December 1, 2007 Its at times of market stress that investors panic. But before you think about getting out or making big changes, Dan has one question for you. In this issue, hell tell you about that and other tough questions for Vanguards international funds, distribution season, and the annual year-end surge in money market yields. But take heart: Dans recommendations will put your portfolio on track for even better returns going forward, and he has a few stocking stuffer suggestions for the holidays, too. Read More November 2007 November 1, 2007 Despite all the latest worries and threats, equity markets moved higher in October, and the Fed cut interest rates again. So with Tech Winter getting underway, and all the talk of large-cap growth coming back, is it finally time to buy U. S. Growth . Dan discusses each in detail this month, with a recap of Morningstars more lenient views of the fund. And in addition to the best funds for Tech Winter . Dan reveals his new October Hot Hands fund and talks about U. S. Value s recent underperformance with its management team. But keep an eye on your account statements, and take a good look at the Vanguard errors Dan reports in this issue. And if you missed Dans changes to the Model Portfolios in the October 4 Hotline . see the notes at the bottom of page 2 for exactly what to do. Read More October 2007 What a quarter The stock markets record high then subsequent tumble was enough to turn anyones hair a lighter shade of grey. But the Federal Reserves 50-basis point rate cut was the balm that soothed all wounds, and stock markets here and abroad closed the quarter with substantial gains. Change is on the horizon this month. Large cap growth stocks are moving, and we may be adding to our holdings soon. Dan also puts his Hot Hands strategy through a new test. He considers the new Megacap funds (are they really necessary) and speaks with Selected Value s Jim Barrow and Mark Giambrone. Read More September 2007 September 7, 2007 Are the wild swings in the stock market these past few months a new paradigm in trading, or is it business as usual Dan tackles that question this month. The good news is, while the markets weaved an unsteady course, our Model Portfolios stood strong. Dan also discusses why just one Balanced Fund will do and speaks with Robert Auwaerter, manager of Short-Term Investment Grade and Intermediate-Term Investment Grade . for his take on the subprime mess. Read More August 2007 Its celebration time: Today marks the 200th issue of The Independent Adviser for Vanguard Investors . Though it started under a different name, it has only gotten better with age. With this issue, Dan reaffirms his commitment to bringing you the best independent research on Vanguard. Meanwhile, bull markets can bring a false sense of security to investors, and so can Vanguards claims about how well it protects your personal information. Dan takes a closer look at the Dows fall from its record high on July 19 and tells how Vanguard blunders put one of his own accounts and that of an FFSA member at risk. He also reveals the inner workings of Vanguard funds through the eyes of the managers and demonstrates the problems with ETF distributions with real accounts he used to track them. Finally, if you have to be rich to invest in hedge funds, they must be great, right Dan shows you the folly in the investing habits of the wealthy. Read More Turns out, it pays more to be a Vanguard executive than it does to invest in Vanguards flagship 500 Index fund. Dan provides all the details on Vanguards Partnership Plan dividend in this months issue. He also takes a look at AXA Rosenberg, the newest quantitative manager taking pieces of both Explorer and U. S. Value . examines whether or not Lifecycle funds have what it takes to go the distance and interviews Global Equity s John Chisholm. Read More The end of May might have been a short week, but it certainly wasnt without its excitement. Even so, one must be prudent. In this issue, Dan talks about the recent market strength and how Vanguards money market funds can provide smart ways to strengthen your portfolio. Meanwhile, he takes a hard look at just what Vanguard managers have money in their own funds. Also worrisome: is Vanguards size affecting its quality of service Finally, he provides a fresh update on U. S. Growth s performance for the last three years, and talks with manager Ford Draper of Explorer to see how the small-cap growth market is doing. Read More Despite expectations for abysmal first-quarter earnings, diversified businesses weathered the new years economic and housing storms, according to early reports from about half of the companies in the SP 500. But not all diversification is created equal. Some would argue that sector funds are a good way to diversify, but as Dan shows, while Vanguards actively managed Health Care has been a great long-term investment, its sector index funds and ETFs dont stand up to careful scrutiny of not only returns, but risk. Speaking of risk, Dan discusses hidden risks in growth and value stocks with Joel Dickson of Vanguards quantitative group. And while Vanguard reduced its quantity of fees, it replaced many of them with a new fee. Dan tells you how you can avoid them altogether. Finally, there is no way around itndashyou cant purchase PRIMECAP Odyssey Aggressive Growth or the other Odyssey Funds at Vanguard Brokerage. Dan tells you where you can. Read More April 2007 A 3.5 drop is a great buying opportunity. But what should you buy Dan tells you in this months issue. Dan also discusses some changes happening at Capital Opportunity --while its still a great fund, he has an even better alternative. With tax season upon us, you need to know that its not tax efficiency that matters, but after-tax returns. Finally, Dan interviews GNMA s two lead managers for their take on the housing market. Read More March 2007 This issue, Dan discusses the markets rock and roll at the end of February. A trio of bears roared through Wall Street, but Dan explains why he doesnt feel were headed for a bear market. Dan also discusses his favorite Vanguard funds and management teams, and why hes put them together into portfolios that beat the market consistently. Dan interviews Jim Barrow, lead manager on Windsor II and Selected Value . and Diversified Value Annuity s solo managerndashhes got some great views on where weve been and where were going. Finally, Dan tackles the age-old question, Is it Growth Equity s time Read More February 2007 February 1, 2007 While the market has been strong since summer, the first few weeks of the year brought a slew of mixed signals. Dan discusses why this may be a time for caution, particularly in regard to REIT Index . which he has given a new rating this month. He also goes into more detail about his Hot Hands strategy and reviews the latest manager changes, best funds lists, and additions to Vanguards ETF lineup. Finally, he asks the tough questions: Are funds of funds really funds of fund fees And what do the trustees really think of a fund managers performance Read More January 2007 2006 was almost like having two years in one: a flat-to-losing year and, after the Feds interest-rate hiking pause, a rocket-ship ride up. This month, Dan looks back on the year that was--as the Model Portfolios on page 2 make abundantly clear, we ended on a very good note. Dan also provides his outlook for 2007 and unveils his new Hot Hands fund. In addition, he discusses whether portfolio rebalancing is really worth it. (Apparently not, according to Jack Bogle, since its been more than three years since hes rebalanced.) Finally, Dan explains 2007s new contribution limits for retirement savings accounts. Read More December 2006 December 1, 2006 This month, its time to strategize about taxes: Dont automatically rebalance, and do look for tax swaps in late December. Dan focuses on Vanguards growth and income category, which includes a number of great (and not so great) funds. For example, with a name like High Dividend Yield Index . shouldnt all of the funds component stocks pay dividends And finally, bond market participants are increasingly trying to bet on interest rate moves, but despite huge cash inflows that are typical of market timing, Vanguard wont close Total Bond Market Index . Read More November 2006 November 1, 2006 November marks the start of Tech Winter . a four-month cycle that is typically very strong for technology stocks. In this issue, Dan discusses which funds will do well, and why. Dan interviews Ron Holt, one of the managers at International Value . and he explains why you should stay away from MidCap Growth until at least the end of December. Read More October 2006 Down Is Up Housing is down, oil is down, inflation is down, and interest rates are down. But stocks are up. The Dow Industrials finished the quarter 44 points below its January 2000 high, and large-cap stocks have definitely grabbed the markets momentum. This month, Dan focuses on Growth funds, and U. S. Growth gets a new rating. He explains why the turmoil in Thailand shouldnt have much of an impact on Emerging Markets Index and which PRIMECAP-managed fund is outpacing its brethren. Finally, Dan discusses why investors in Precious Metals and Mining may need to watch out below. September 2006 September 1, 2006 Short Circuit Closed and high-minimum funds sometimes make it difficult to gain access to top investment managers. This month, Dan addresses this increasingly frustrating phenomenon by finding several non-Vanguard managers worthy of investors dollars. He discusses some insights into what will happen when Ed Owens, the famed stock-picker at Health Care . finally retires. Dan also sets the record straight on Selected Value and interviews the Granahan Investment Management team, best known for their work on Explorer . August 2006 Hiking a Fine Line The Federal Reserve meets next Tuesday, August 8, and its members, led by Chairman Ben Bernanke, will be walking a fine line related to the ultimate disposition of the current economic expansion. If they lean too far toward tightened monetary policy, theyll risk snuffing economic growth. If they lean too far the other way, by leaving interest rates where they are, theyll risk inflation getting out of hand. Is there a middle ground In this issue, I compare Vanguards PRIMECAP-managed funds with PRIMECAPs private-label Odyssey funds. I sit down with Dividend Growths Don Kilbride to get a sense of where the fund is headed. And finally, I take a closer look at taxable bonds in this months funds focus. First Half Humbling Any overhanging uncertainty about the Feds desire or need to raise rates again was finally resolved on June 29, when they pushed the Fed Funds rate to 5.25. And, with that bit of uncertainty resolved, traders got back to buying rather than selling. This month, Dan discusses Diversified Equity and interviews Global Equitys John Chisholm. He also explains why this is absolutely the wrong time to cut back on foreign funds. Inflation Nation Inflation was the source of much hand-wringing and stock selling in May. This month, Dan speaks with Joel Dickson on the differences (and similarities) between Strategic SmallCap Equity and Strategic Equity . Dan also discusses why changes at Windsor II caused him to swap it out of the Model Portfolios and unveils his replacement. Later, Dan shows you how to construct a VIPER portfoliondashby using his Growth Index Model . Cookin With Oil This month, Dan interviews Paul Kaplan, the retiring manager of GNMA . who says that oils price doesnt have the same impact on our economy as it once did. He also responds to The Wall Street Journal s assertion that closed funds cool down. Finally, Dan discusses Vanguards latest new funds, including several new siblings for Target Retirement Income . April 2006 Happy Anniversary. March 2006 marks a full six years since the bull market hit its peakmdashthe SP 500 Index hit its high on March 24 of 2000, the NASDAQ Composite on March 10 of that year. The major indices are still well below their highs. Will year 7 be the lucky one Dan also takes a look at variable annuities and discusses Dividend Appreciation Index . March 2006 Why the Selloff Google it. In this months issue, Dan discusses Vanguards newest fund, Strategic SmallCap Equity . which couldnt come at a better time, considering Explorer s recent closing. Dan also considers what matters more: tax efficiency or after-tax return Finally, Dan describes just how little the media agrees on the best funds for 2006. February 2006 February 1, 2006 Bernanke at Bat Dont put your passport away just yet. In this months issue, Dan explains how International Explorer scored top Hot Hands billing three years in a row. He also discusses exactly what Ben Bernanke will be facing as he takes over as Fed Chairman. In addition, Dan highlights tax-free funds and interviews Explorers co-manager, Kenneth Abrams. January 2006 A Record Year This month, Dan looks back on 2005ndashin many ways the year ended with records not simply beaten, but shattered. He provides full-year performance reviews for each Vanguard fund, unveils his strategy for 2006 and names his new Hot Hands fund. The new year also heralds improvements to IRA savings, and Dan gives his top fund picks for the Boomer generation (and their kids). December 2005 December 1, 2005 Order your copy of the 2017 Independent Guide to the Vanguard Funds today Americas 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 Foundations Editorial Excellence Award. View More raquo Daniel P. Wiener Editor, The Independent Adviser for Vanguard Investors Vanguard Funds Correlation Correlation Tool You dont want to own too many funds that are similar, but how do you tell A high correlation between funds may mean that your portfolio of funds is not as diverse as you might want it to be. While other tools may compare funds only to the SP 500 (or 500 Index fund), you can use this tool to determine how closely the performance of one Vanguard stock fund tracks that of any other Vanguard stock fund. Compare all the funds that you own. To diversify, look for funds that have low correlation with one another. Copyright copy 2017 InvestorPlace Media, LLC. Todos os direitos reservados. 9201 Corporate Blvd, Suite 200, Rockville, MD 20850. A service of the Fund Family Shareholder Association. The Independent Adviser for Vanguard Investors and FFSA are completely independent of The Vanguard Group reg. Vanguardreg, The Vanguard Groupreg, and The Vanguard Group of Investment Companiesreg are service marks of The Vanguard Groupreg. FFSA is not affiliated with or endorsed by The Vanguard Groupreg, The Vanguard Group of Investment Companiesreg, or any Vanguardreg mutual fund. Financial Market Data powered by Quotemedia. Todos os direitos reservados. Terms and conditions. NYSEAMEX data delayed 20 minutes. NASDAQother data delayed 15 minutes unless indicated. Gain access to the Independent Guide to the Vanguard Funds today
No comments:
Post a Comment