The anatomy of our methodology requires synergy among several unique components—but working with Vanguard Personal Advisor Services is simple. You partner with an advisor, and then you work together to create a long-term plan, invest your portfolio, track your progress, and rebalance and make adjustments as needed.

Let’s look at the essential parts of our process.

First, we start with your goals

Before an advisor can choose your investments, you have to identify your investment goals. Are you saving for retirement, college, or a vacation home?

Measurable and attainable goals are the backbone of every sound investment plan. We believe you’re more likely to achieve investment success if you can clearly define what you’re working toward. For instance, “For the next 20 years, I want to save X amount of my income for retirement.”

Before creating your personalized financial plan, an advisor got to know you. He or she developed an understanding of your situation and identified potential challenges that could get in your way.


Did you know? When you partner with an advisor, you can establish up to 9 portfolios and prioritize them by goal, which helps increase the chances of meeting your financial objectives.


Next, we look at your asset mix & diversification

Your asset mix is how you choose to divide your investments among main asset classes—generally stocks, bonds, and short-term reserves. Each asset class has unique pros and cons. For example, stocks and stock funds may provide you with a greater opportunity for higher returns—but they expose you to the most risk, which is a measure of how likely you could be to lose money in an investment.

An advisor chose your asset mix with your goals, time frame, and risk tolerance in mind. Because your asset mix regulates how your portfolio reacts to market movements, choosing the correct asset mix is one of the most important decisions an advisor makes.


Did you know? Nearly 90% of your portfolio’s risk and potential for return is determined by your asset mix.*


Diversifying among asset classes

Asset classes are groups of securities that share similarities, but each asset class performs differently. Owning a diversified portfolio is one way you can reduce risk. For example, investing in bonds can help offset some of the risks you take when you invest in stocks because the prices of bonds and stocks move in opposite directions.

A closer look at sub-asset classes

Sub-asset classes further categorize stock and bond securities. There are several sub-asset classes of stocks and bonds, and each sub-asset class has specific characteristics. For example, stocks can be classified as growth or value. Growth may characterize an expanding company’s stock shares, while value may define the stock shares of a well-established company.

Your portfolio may include different asset and sub-asset classes to maximize diversification and minimize risk.

And finally, global exposure

Broad exposure to all markets―U.S. and international—can also help diversify your portfolio, reducing risk and minimizing the long-term effects of market ups and downs.


Did you know? Non-U.S. companies make up 60% of the world’s total stock market capitalization. And foreign bonds make up almost 60% of the overall bond market.**


Research suggests that adding international investments to a portfolio helps reduce its volatility over time. To get the full benefit of diversification, an advisor is likely to recommend starting with a 40% international stock allocation and a 30% international bond allocation.


Did you know? It might sound counterintuitive, but adding “risky” non-U.S. investments to your portfolio (as part of a broader portfolio) actually reduces volatility risk.***


Putting it all together

There’s more to a partnership with a financial advisor than meets the eye. Vanguard’s time-tested principles for investment success are the bones of our advice services, providing the framework for every financial plan, investment strategy, and recommendation. Although several moving parts work together to support our advice process, we strive to make your experience with Personal Advisor Services as easy as possible.

* Source: Vanguard research—The global case for strategic asset allocation and an examination on home bias (Scott et al., 2017).

** Sources: Vanguard, Thomson Reuters, MSCI, and Barclays. U.S. market represented by MSCI USA Index; non-U.S. market represented by MSCI World ex USA from 1969 through 1987 and MSCI All Country World Index ex USA thereafter. Data as of December 31, 2015. International equites are represented by the MSCI AC World Index ex USA IMI. U.S. bonds are represented by the Bloomberg Barclays U.S. Aggregate Bond Index. International bonds are represented by the Bloomberg Barclays Global Aggregate ex-USD Index.

*** Source: Vanguard research—Global fixed income: Considerations for U.S. investors, February 2014.

Notes:

All investing is subject to risk, including the possible loss of the money you invest.

Past performance is no guarantee of future results.

There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.

Diversification does not ensure a profit or protect against a loss.

Bond funds are subject to the risk that an issuer will fail to make payments on time and that bond prices will decline because of rising interest rates or negative perceptions of an issuer’s ability to make payments. Investments in bonds are subject to interest rate, credit, and inflation risk.

Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.

Stocks of companies based in emerging markets are subject to national and regional political and economic risks and to the risk of currency fluctuations. These risks are especially high in emerging markets.

Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.