Stocks rose modestly over the first half of the year but slid in August and September as concerns mounted that China’s economic slowdown would spread globally. Falling oil and commodity prices also affected economies and markets across the world for better or worse. Central banks in Europe and Asia bolstered their stimulus efforts against weak growth and low inflation. And in December, the Federal Reserve ended months of uncertainty when it raised the target for short-term interest rates to 0.25%–0.5%.

International stocks returned about –5%, restrained by the U.S. dollar’s strength against many foreign currencies. Emerging markets fared the worst.

U.S. bonds ended the year with a slight advance

The broad U.S. taxable bond market gained 0.55% over the 12 months; income accounted for the modestly positive result. The yield of the 10-year Treasury note ended December at 2.30%, up from 2.19% a year earlier. (Bond prices and yields move in opposite directions.)

Investors focused on the Fed’s stance on short-term interest rates and alternately embraced or avoided safe-haven assets depending on the stock market’s strength. International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned –6.02%, reduced by the dollar’s strength against many foreign currencies. Without this currency effect, returns were modestly positive.

Although the Fed raised its target for short-term interest rates in mid-December, returns for money market funds and savings accounts remained limited by the 0%–0.25% levels in place for much of the past seven years.

Vanguard funds that outperformed their peer-group averages (Periods ended December 31, 2015)

 1 year3 years5 years10 years
All Vanguard funds:81% (276 of 342 Vanguard funds outperformed their peers; 20,142 funds in peer category for this period)88% (285 of 325 Vanguard funds outperformed their peers; 16,928 funds in peer category for this period)87% (263 of 304 Vanguard funds outperformed their peers; 14,429 funds in peer category for this period)92% (186 of 202 Vanguard funds outperformed their peers; 8,559 funds in peer category for this period)
Money market funds:100% (10 of 10 Vanguard funds; 554 funds in peer category)100% (10 of 10 Vanguard funds; 552 funds in peer category)100% (10 of 10 Vanguard funds; 531 funds in peer category)100% (10 of 10 Vanguard funds; 438 funds in peer category)
Stock funds:78% (161 of 207 Vanguard funds; 11,986 funds in peer category)83% (165 of 200 Vanguard funds; 10,255 funds in peer category)88% (165 of 188 Vanguard funds; 8,749 funds in peer category)89% (109 of 122 Vanguard funds; 5,563 funds in peer category)
Bond funds:83% (82 of 99 Vanguard funds; 4,090 funds in peer category)97% (86 of 89  Vanguard funds; 3,260 funds in peer category)80% (65 of 81 Vanguard funds; 2,838 funds in peer category)94% (49 of 52 Vanguard funds; 1,629 funds in peer category)
Balanced funds:88% (23 of 26 Vanguard funds; 3,512 funds in peer category)92% (24 of 26 Vanguard funds; 2,861 funds in peer category)92% (23 of 25 Vanguard funds; 2,311 funds in peer category)100% (18 of 18 Vanguard funds; 929 funds in peer category)

Results will vary for other time periods. Only funds with a minimum 1-, 3-, 5-, or 10-year history, respectively, were included in the comparison. (Source: Lipper, a Thomson Reuters Company.) Note that the competitive performance data shown represent past performance, which is not a guarantee of future results and that all investments are subject to risks. Investment returns and principal value will fluctuate, so investors’ shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data cited. For the most recent performance, visit our website at


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

An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in such a fund.

Market data sources: Vanguard, based on market benchmarks. U.S. stocks represented by the Dow Jones U.S. Total Stock Market Float Adjusted Index. International stocks represented by the FTSE Global All Cap ex US Index. Bonds represented by the Barclays U.S. Aggregate Bond Index.

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