Watch the full replay »

Other highlights from this webcast

Vanguard webcast library


Amy Chain: Hi, I’m Amy Chain and you’re watching a replay of a recent webcast we offered on investing fundamentals that can help you and your family achieve a variety of financial goals. We hope you enjoy it.

Amy Chain: Hi and welcome to our live webcast. I’m Amy Chain. Tonight we are going to discuss investing fundamentals that can help you and your family achieve financial success. We’ll cover a variety of topics, from investing for retirement and college, to Vanguard’s principles for investing success.

Joining us are two experts on these topics, Michael DiJoseph, an investment analyst in Vanguard Investment Strategy Group, and Kevin Miller, a Certified Financial Planner professional with Vanguard Personal Advisor Services. Gentlemen, thank you both for being here this evening.

Michael DiJoseph: Thanks for having us.

Kevin Miller: Thank you.

Amy Chain: Of course, we will spend most of our time this evening answering questions from you, our audience. But before we get started, there are two items that I would like to point out. There is a widget at the bottom of your screen there to offer you technical help. It’s the blue widget on the left. And if you would like to read some of Vanguard’s thought leadership material that relates to tonight’s topic or view replays of past webcasts, you can click on the green and white Resource widget on the far right side of your screen. Are you ready to jump in?

Kevin Miller: Absolutely.

Michael DiJoseph: Let’s do it.

Amy Chain: Okay, we’re going to start with a question for you, audience. We’re going to toss a question to you. It should be appearing on your screen now, and that question is, “where are you on your investing journey?” Your choices are: retired, nearing retirement, prime working years, or just getting started. Go ahead and respond now, and we’ll share your answers in just a few minutes.

While we’re waiting for them to weigh in, Mike, I’d love for you to jump in and take a question that we got ahead of tonight’s webcast. I’ve mentioned a few times this evening principles, fundamentals for investing success. Joseph from Baltimore says to us, “As a new investor, what are some of the fundamentals and what are some of the mistakes to avoid?”

Michael DiJoseph: Great, we’ll it’s actually a really great place to start. It’s right at the beginning of investing, and so here at Vanguard we kind of subscribe to this theory of focusing on what you can control; and so we’ve developed what we call our Principles for Investing Success, so it’s goals. Right, understanding why you’re investing and creating a plan to help you achieve those goals. Balance, so creating a diversified portfolio. Costs, right, the less you pay the more you keep in investing. And then discipline, so the disciplined actually stick with it.

Now as far as mistakes to avoid, you know, the really big one, I’d say, avoid waiting too long to get started more than anything else.

Amy Chain: I think we’ll probably talk more about these investment principles as we talk this evening, but I’ll just point out that there’s a lot of information on these principles on our website. So if anybody wants to log on and take a look, you can read about some of those principles again there.

Okay, it looks like we’re still waiting for some responses, so let’s jump into another question that we got ahead of time. This is another sort of obvious question that we get very often. I shouldn’t say the answer is obvious, but we get it all the time from clients; and that question is, “how do I decide between a traditional IRA or a Roth IRA?” Mike, you want to kick us off on that one?

Michael DiJoseph: Sure. So I think to start, let’s talk about the difference between an IRA and a Roth IRA. So an IRA, and they’re both great savings vehicles for retirement savings in particular; but an IRA is tax-deferred growth where a Roth is tax-free, meaning, so with a regular IRA, you’re putting in money before you pay taxes on it. And then when you go to withdraw it in retirement, you’ll actually pay the taxes then. Now with a Roth, you’re paying the taxes up-front and then it grows tax free so when you take it out in retirement, you don’t actually have to pay any other taxes.

So I’d say the number one way to decide which one to contribute to would be if you have some idea of what your future tax rates are going to be. So if you think that your tax rate in the future is going to be higher than it is now, then maybe consider investing in the Roth, right? So you’re paying at today’s lower rate and vice versa.

Amy Chain: And what might be a reason someone might expect a higher tax rate in the future?

Michael DiJoseph: Well, if you’re just getting started and you’re kind of early on, lower down on the income tax bracket, I would say that. But we know the reality is most people don’t know for sure, especially if you’re just getting started. If you’re 20 or 30 years old, you have several decades to go. Just like we say diversify with investing, we also say, “hey, diversify with your tax status.” So tax diversification, maybe do a little bit of each.

And I will say there’s one other benefit too to a Roth IRA. Again, if you’re saving for something else, say it’s a house or something like that, you can actually take out your contributions up to the level that you actually contributed, not the earnings on top of it. You can take that out tax free at any time.

Amy Chain: Kevin, do you hear a lot from your clients about the difference between these two?

Kevin Miller: Absolutely, and one thing to consider is eligibility. So with a traditional IRA, it’s based on the way that you file your taxes, your level of income, and whether or not you’re covered by a retirement plan. The Roth IRA is pretty much just your tax filing status and your income level, so you have to check and make sure that you’re eligible to make a Roth contribution because not everyone is able to. But they can be tremendous savings vehicles, especially, again, for someone that’s starting early.

Amy Chain: Okay, looks like our polling results are in. The most frequently occurring viewer we have this evening is in their prime working years; but, frankly, we have everybody across the board. We’ve got about 16% of our audience just getting started, about 20% retired, 20% nearing retirement, and then a full 40% in their working years. So we’re covering the spectrum this evening. I think we’ll have a lot to cover then because we’ll want to give a little bit of everything, something for everybody.

Audience, I’m going to throw another question out to you; and I’ll ask you to weigh in while we start tackling some more of the questions we got ahead of time. That question is, “Do you have a written investment plan?” You can answer yes; no; no, but I plan to create one; or no, and I don’t even know how to get started. So we’ll look forward to hearing from you on that; and in the meantime, Kevin, I’m going to toss a question your way. This one comes from Jan in Aurora, Illinois. Jan, thanks for your question. “For ones nearing retirement, how do investors protect their portfolio against a big market correction?”

Kevin Miller: Yes, it’s a theme that I hear a lot from clients that I talk to on a daily basis, and I think it’s really about having a plan ahead of time and then sticking to the plan and not letting the market really dictate what you’re doing from an investment standpoint. Because when you’re doing that and emotion starts to creep into the decision-making process, that’s when people tend to make more of the mistakes and that you make; decisions that aren’t necessarily in your interest long term.

Amy Chain: Very good. Do you think that people should be asking themselves these questions before a market correction? I would imagine that we want to have a durable plan, right, not a plan that doesn’t hold up.

Kevin Miller: Absolutely, and that’s why we talk about having a written plan. Even if it’s something that simple, it doesn’t have to be really complex that dictates changes because as someone gets closer to retirement, generally you want to get more conservative. And having that mapped out ahead of time can be a huge thing because then it alleviates, I think, a lot of the anxiety because, again, you’re not dependent upon what the market is doing to make those changes.

Amy Chain: That’s a great segue. It looks like only about a quarter of our viewers this evening have a written investment plan. So certainly we want to provide some pointers to those that are thinking about getting started. Can we spend a few minutes talking about what is an investment plan and how might one get started?

Kevin Miller: Absolutely. So, again, you can make it as complex or as simple as suitable for you, so the plans that we create at Vanguard really cover things like the goals that you have. A lot of what we do is based on what is it that you’re trying to accomplish with this money. Are you saving for retirement, are you saving for college, are you saving for a home purchase? And then from there, what’s the best allocation to help you get to that particular goal, based on the amount of risk that you’re comfortable with, the time horizon that you have, and, then, finally the last thing and sometimes investors want to start with the investments and that’s really what you tend to look at last, which would be what investments then could we utilize to fit into these particular goals that we have?

Amy Chain: And I’ll remind our audience this evening that the Resource widget list that I mentioned has more information on an investment plan and many other topics that we’ll be talking about this evening.

Kevin, since I have your attention here, let’s throw a question to you that will help address some of those that are just getting started out there, that are watching us this evening. Danielle from Massachusetts says, “I have three young children, 4, 1, and 1 month,” so Danielle has got her hands full. And Danielle would like to know about paying for their college. “Is it possible to do all at the same time, keeping my retirement in mind? Where should I be putting my money?” I imagine this is another one you get a lot from your clients.

Kevin Miller: Absolutely, it’s a big part of financial planning. It’s how do I allocate a finite amount of resources, and people are often juggling, saving for their own retirement versus saving for a college goal.

The one thing I would really stress is that generally retirement savings takes priority over college savings because there’s no loan for retirement. There’s options for college goals—grants, scholarships, those other funding vehicles. And also for someone that wants to save for retirement, 529 plans are great resources for those types of things. So parents, grandparents can contribute to those. You get, potentially, some great benefits from tax-deferred growth if the money is used for college expenses in the future.

Amy Chain: That’s a great point. I have a lot of friends with children. When they say, “I’m saving for my kid’s college,” and I say, “In a 529?” And they say, “Well, no, in a savings account.” So I think they might be leaving some benefits on the table. Very good.

Mike, maybe you can answer a question from Mel in California who says, “How do you get your kids interested in investing?”

Michael DiJoseph: That’s a great question, so I would say involve them early on, as with anything else. So teach them financial literacy when they’re young. Maybe it’s paying them an allowance. I’ve heard of matching the allowance, almost like in a 401(k) where you contribute a certain amount and maybe get a little extra and make them kind of chip in when they want to buy something, so they actually have some pride in their own investments.

I’ll throw another idea out there that I heard recently. So we have the pleasure of working with our Charitable Endowment Program here at Vanguard, so the donor-advised fund, and I was at an event where they were talking; and they said that starting, even if it’s a modest amount of a few thousand dollars, starting almost like a family charitable donor-advised fund is something that can kind of bring your family together, and then you can make allocations as the fund grows to charities. So not only does it teach them about investing and savings, it also gives them a little taste of philanthropy as well.

Amy Chain: I think that’s a great point because you can start with just a little bit or you can go all the way up to making larger investments on behalf of your family.

Michael DiJoseph: Great.

Kevin Miller: And I would also say we were talking about the 529 plans. Like it’s great if money saved for college, when the children are of an appropriate age, because they have a vested interest in that money. So showing them, “Hey, this is how the money’s invested. Here’s how it’s growing over time,” and they can see the real impact of that because, ultimately, it will benefit them.

Amy Chain: I’m going to throw a question out there from Anton, who is asking us about something that I think is on the minds of many right now. How are we thinking about the Fed decisions and how that may or may not affect bond markets as interest rates perhaps change? Anybody want to tackle that one?

Michael DiJoseph: Well I’ll start with this. We’ve been talking a lot about a plan and the importance of having a plan. I would say that your plan should be very focused on you and your life and what happens in your life, and it should be durable for different market conditions—for rising rates, for falling rates—regardless of what the Fed does.

So for most people, we wouldn’t say to change anything about what they’re doing. Based on what the Federal Reserve is doing, it’s kind of having that written plan that allows you to have a little more discipline when you’re actually sticking to it and understanding, hey, you know, if something changed in your life, then maybe you kind of change course a little bit. But absent that, we would say that all else equal, we wouldn’t advise a change for most people just based on a Fed decision.

Amy Chain: And maybe we could spend a minute, as well, talking about the difference between sort of bond investing and investing in a bond fund and how interest rates maybe have a different impact. Mike, do you want to tackle that one?

Michael DiJoseph: Sure, yes. So, actually, when you’re investing in a bond fund, you have a portfolio of a bunch of different bonds, so there’s diversification. And what happens is, so let’s say the Federal Reserve raises rates, and the bond market rates follow, which you know there’s not a perfect relationship there. But what will happen is that fund is now buying those new bonds at a higher yield, right? So in traditional economic theory as interest rates go up, bond prices go down. So let’s say you buy an individual bond, and the rate goes up, the price is going to down. Now it really doesn’t matter that much, unless you actually sell it. Right, you’ll still get your principal back, all else equal at the end. But when you have a bond fund, rising rates can actually help a long-term investor because they’re actually buying new bonds at higher rates, so you’re getting a higher return from those bonds.

Amy Chain: Kevin, I bet you’re getting a lot of questions about that from your clients. I’m going to throw a question to you from Kim who is planning on retiring in 13 years. Kim says, “I have not saved enough for retirement. Is it all right to invest with a little more risk for a few years to help me make up for lost time?”

Kevin Miller: So, I think you would want to be careful there because it’s something that I hear from clients where they’re trying to make up for lost time being more aggressive. But you have to look at the reverse of that. So let’s say now market conditions are really favorable and you make a little bit more. If that turns around and you stand to lose, then maybe it’s not such a great decision. And then also making sure that it matches up to your risk tolerance. So if it’s not something that you’re able to stick with long term, then, again, it may not benefit you in the long run. You may be worse off than you would have been with a more consistent allocation that you could stick with.

Amy Chain: So how might we suggest Kim start thinking aggressively if not investing aggressively about how to prepare for retirement?

Kevin Miller: Yes, so I think you can look at other things. So maybe the rate that you’re saving at or maybe the amount of time until you retire, because those are variables as well. As well as what are your expectations in retirement as far as spending goes because they will all impact what the number is that you need to retire. So you can get away with maybe taking on a little less risk if you’re able to adjust some of those other factors.

Amy Chain: Very good. Okay, I’m going to go back to bonds for a minute here. Mike, talk to me about at what income level tax-free bonds might make sense for an investor.

Michael DiJoseph: Okay, yes. So when we talk about tax-free bonds, we’re generally talking about municipal bonds, which are states and local governments. So you won’t pay federal income tax on them. And if you buy one that is your state, you won’t pay state income tax on it either. And even if you buy one that’s your locality, then you could have it completely tax free.

Two ways to look at it. So the first way is what we would call the tax-equivalent yield. And so it’s a pretty simple formula, so it would be the yield of the tax-free bond, right, the muni yield, divided by 1 minus your tax rate. And that will tell you if I were to buy say a Treasury bond or a corporate bond, at what rate does that equal the rate that you’ll get on a muni bond tax free. Conventional wisdom says it’s around the 33% tax bracket, but that’s not always the case.

The other thing to think about is whether you actually have what we would call shelf space in a tax-advantaged account. So if you have room—

Amy Chain: Define tax-advantaged account for me please.

Michael DiJoseph: So a 401(k), a Roth, or traditional IRA, so something that has some kind of tax advantage built into it. The reason being taxable bonds, some nontax-exempt bonds tend to be very tax inefficient relative to other types of investments. And so if you actually have room in say an IRA, you can put your bond allocation in there. And let’s just say, hypothetical, you know, the taxable bond yields 5% and the municipal bond yields 3%. Now if you can put it in a 401(k), then you get the full 5% without paying taxes on it either, regardless of what we thought the taxable muni spread is. So, hopefully, that’s not too in-depth there; but we would say, as with anything, these are very individual decisions and consider consulting an advisor or your accountant.

Amy Chain: You make a good point about consulting an advisor. Kevin, what are some of the things we advise clients to think about when choosing an advisor?

Kevin Miller: Hey, absolutely. So I think you can really break it down into two components, so one is the individual themselves. So making sure the advisor, what are their credentials? What’s their background? How are they compensated? That’s a big thing, and do you pay a fee for assets under management versus someone that gets paid for every transaction that they do.

And then I think looking at their methodology and exactly how is it that they manage assets. Do they do a lot of trading or are they more buy and hold? Do they use individual securities? Are they trying to pick stocks versus having a really well-diversified portfolio because they can all give you very different results and, ultimately, you have to figure out what it is that you are looking for and then what you are comfortable with.

Amy Chain: Kurt has asked us a question about our thoughts on active versus passive management. I think I could probably ask you both for a take on this one. Kevin, you want to get us started?

Kevin Miller: Absolutely. So, Vanguard offers both funds and, you know, for us it’s more around high cost, low cost which historically active has been more high cost, but if you can find active management at lower cost, it gives you a better chance to have slightly better performance. You do have to look at the types of accounts that you have because certain types of funds are better suited for different types of accounts. So, generally, that would mean active funds in tax-deferred accounts, more index-type investments in taxable accounts where you’re not going to see a lot of involuntary capital gains that you don’t have control over at year-end.

Amy Chain: Mike, anything to add?

Michael DiJoseph: Yes, you know I’ll throw another wrinkle in there too. It’s kind of this behavioral aspect of it. So, our research has shown that, you know, there are actually active managers out there who can outperform the market over time. It’s really difficult and it’s basically impossible to identify ahead of time. But we see, even the ones who do, people tend not to stick with them for long enough to actually get that benefit. So, we’ll often see a manager that does really good over say 10 or 15 years but it’s bound to happen. It’ll be a 3 or a 5 or maybe even a longer period of time when they’re underperforming, meaning they’re not beating the kind of relative benchmark.

So, we’d say, if you do make the decision to buy an active fund, as Kevin said, obviously, low cost is by far the most important thing, but other than that, you know, have the conviction and stick with it unless something changes again in your situation or with the manager.

Amy Chain: Let’s spend a minute talking about why costs are important particularly in an actively managed fund. Do you want to tackle that?

Michael DiJoseph: Sure. Well, the way we talk about it is, you know, you get what you don’t pay for. Right? So, the less money that you’re paying out of pocket to a manager, the more you’re keeping. Now, when you put that on the fund level, if you have say one manager who’s charging 1% a year and one manager who’s charging 0.5% a year, you know the one who’s charging 1% has to beat the market by 1% just to break even to you, the end investor, on a net basis. Whereas the one who’s charging 0.5%, they only need to outperform by 0.5% per year. So, we have found that is by far the number one predictor of success of an active manager.

Amy Chain: Thank you for that. Let’s answer a question for Suzanne who falls into our prime investing years and gearing up for retirement phase. Suzanne asks, “What adjustments one should make after 50 years of age to their portfolio that they’re preparing for retirement?”

Kevin Miller: Sure. So, I think it’s—really it can start well before age 50. We tend to look at it not so much based on a particular age but more the number of years that you have until you get to retirement. The thought is that as someone gets closer and closer to retirement, you would want to get gradually more conservative with the allocation. So, looking at, you know for someone that’s 50 and plans on working until 55 could be very different from someone that’s 50 and plans on working until they’re 65 or 70, but just really starting, looking at that really when you start your employment career and then continuing that straight through until retirement.

Amy Chain: Well, let’s keep that though going and let’s answer a question for Barbara who is now in retirement, a question for our retirees out there, and she understands the don’t panic part. What she has a question about is the best place to invest their nest egg while they’re using it in retirement. “If we can’t afford to lose money at this stage of life, should be put it under our mattress?” she says.

Kevin Miller: No. So, again it comes down to having a well thought out plan again with those things that we talked about before. So, having something that matches with your risk tolerance, your time horizon, the goal that you have for that money so that regardless of what the market does that you’re able to stay the course and not deviate away from that. And it can be really difficult depending on what the market does, but it really is what gives you the best chance for long-term success.

Amy Chain: Mike, anything to add?

Michael DiJoseph: Nope.

Amy Chain: Okay, we’re getting a lot of questions about bond investing. In particular, Zoran asks, “In the coming years, thinking what we think might be coming with regard to the bond market and interest rates, where should we be investing in bonds? What kinds of bonds should we be thinking about?”

Michael DiJoseph: Interesting question, again something that Kevin probably hears all the time in his job and something that we deal with as a research team all the time. I think the best way to answer this is to take a step back and really think about what is the role of bonds in a portfolio? So, at Vanguard we believe that bonds are there to diversify equity risk. So, simply put, when the equity markets go down, bonds are there to provide ballast to that part of the portfolio not necessarily meant to be something that you’re looking for the highest possible return from.

Now given that, what we know is that when equity markets do go down, high quality bonds—so, whether it’s high quality, highly rated corporate bonds or especially government bonds—tend to go in the opposite direction of the stock market. So if the stock market goes down, and like we saw in 2008 and 2009, treasury bonds and highly rated corporate bonds will go up. Now things like high-yield bonds, emerging market bonds for example. So, we’ve seen a lot of people investing in them over the past 10 years as rates are low because they think hey it’s still a bond, it’s still very safe and it’s getting a little higher yield.

Amy Chain: Is that what people are talking about when they say the flight to quality.

Michael DiJoseph: Right. So, that’s or we call kind of chasing yield, right? But what happens is those things tend to behave in the same direction as the stock market when the stock market goes down. So, when you need that ballast most, when you need the protection in your portfolio of that diversifying asset, that’s when they tend not to perform that way. So, to answer the question you know for the vast majority of people we say you should be investing in diversified bond funds of a high credit quality.

Kevin Miller: And I would just add in what I hear a lot from clients is, “Well, can I use dividend paying stock as a substitute for bonds,” and it’s exactly what Mike said. That when you look at it, bonds are there to help diversify away the risk and, at the end of the day, whether a stock is paying a dividend or not, it’s still a stock, and if the stock market is down 10%, 15%, 20%, you’ll potentially see those losses as well. So, having something that pays a dividend doesn’t really provide the diversification that you’re looking for.

Michael DiJoseph: And you know, one other thing to add there too, and we kind of addressed it earlier, again when interest rates go up, if you’re investing in a bond fund, your return from that bond fund over a long period of time will actually be higher. All right so, if interest rates today are let’s just say 2% or 3% for a bond fund, your return to that fund over say the next 10 years will probably be around 2% or 3%. Now, if rates were to go up to 3%, 4%, 5% whatever, it may happen with them; I don’t think we have any confidence we can predict them any more than the next person, but you’ll then get that return going forward.

So, you know I get it, right? The question is where do we invest when interest rates are rising and there’s kind of some fear there, but it helps to really understand how bonds work and how they fit into your portfolio. Hopefully, that’s a different way to look at it.

Amy Chain: Very good, thank you. Scott from Miami is asking, “How can I plan to determine when I can retire and be financially stable without too much worry?” Kevin, you get this question a lot too?

Kevin Miller: Absolutely, and I think the keyword there is “plan” because I talk to a lot of individuals that they’ve attached a particular date to when they would like to retire, and then you dig a little bit deeper about the planning that they’ve done. Have they thought about what retirement looks like? And they haven’t done any of that. So, you really want to start thinking about what does retirement look like. Am I going to spend a lot of time volunteering in my community which maybe doesn’t cost all that much, versus someone that wants to do a lot of traveling which could be very expensive. Because your costs in retirement are going to be a big factor on how much it is that you need to save. And so thinking ahead of time about what that looks like is a huge factor.

Amy Chain: We’ve talked a lot tonight about portfolios at various stages so a lot of folks are writing in and asking us, “how should I be determining what my asset allocation should be at any given stage?” Maybe we can talk through some basic sort of basic rules of thumb. Want to kick this off, Kevin?

Kevin Miller: Sure. So, again we look at it based on what your level of risk is and then the number of years out, and we typically work backwards from your retirement year in say a few year increments, and then generally you say, okay over each of those time periods you want to gradually reduce the amount of risk on this fixed schedule. The fancy term is called the glide path but, really, it’s just this systematic reduction so that, again, it’s not market dependent and you’re reducing the risk over time so that as you get closer to retirement, you’re set and you’re a little less concerned about what the market’s doing at that point.

Amy Chain: And are you using the word risk to represent an equity allocation in the portfolio?

Kevin Miller: Really both. Investors are typically worried about not always stock market, but we get a lot of questions about bonds and potential for rate increases and how does that impact bonds in the short run.

Amy Chain: Any thoughts to add?

Michael DiJoseph: I would add you know risk goes both ways. So, there’s the risk when you’re heavily invested in equities, there’s the risk that you could lose money. When you’re not, there’s the risk that you could miss out on that especially if you have the ability to take that risk and you’re kind of not investing in the stock market a little bit, you could lose some purchasing power and maybe not reach the goals that you set out to reach.

Amy Chain: Let’s talk a little bit about pension money and how that should fit into retirement. Dan from Illinois is asking, “What’s the best way to view or include pension money in relation to retirement investments in an asset allocation?” So, pensions maybe add a different spin to how folks should be allocating. What are additional ways? Well, let’s answer that question first and then we’ll tackle his follow-up question.

Michael DiJoseph: Sure, so the way that we would look at it, you know there’s kind of two schools of thought. There’s one that you take the pension and it’s kind of like your bond allocation. So, the way that we at Vanguard would look at it, we’d say kind of getting back to the plan, when you’re planning for retirement, we would look at what’s your income and what’s your expenses. So income would be social security, side employment, or pension, right? And then you look at your expenses and the gap between those. So, if you have higher expenses than income, that means you have a funding need from your portfolio, and I would say that determines your ability to take risk. And so, when we talk about risk tolerance, it’s the ability and the willingness. Like, how much can you sleep at night having risk, but also how much are you able to actually take that risk. So, we would say it goes into that equation that way.

Now if you’re someone who has a very small need and you know a relatively large portfolio, then you know it’s kind of well maybe you don’t need to take a lot of risk because you’re already kind of funded.

On the flip side, if you don’t absolutely need a lot of that money, you could also take more risk. It kind of depends on your goals from there whether you’re trying to leave it for the next generation, maximize the wealth, or kind of maximize your peace of mind.

Amy Chain: And I think maybe you got to this for those that have a pension, but if you don’t have a pension, what are some of the ways that you should be thinking about your sort of income need pool and how to allocate that? Your pool of money you have set aside for income.

Michael DiJoseph: Right, so presumably you have some kind of a gap there. Most people don’t actually have a pension. So, it’s kind of social security, side income, and then your portfolio is really especially under our current retirement system, it’s really heavily relied on to produce income. And so, this is something our team actually does quite a bit of work on, and we’ve come up with a strategy called Vanguard’s Dynamic Spending Strategy which is, you know, a fancy way of basically saying that when the market goes down, you kind of cut back your spending a little bit and when the market goes up, you can increase it a little bit.

Now, we have some kind of rules around it, what we call a ceiling and a floor, meaning you don’t want to decrease it too much in the bad years, but we found that just minor adjustments. So, for example, an adjustment of 2.5% decrease in spending in a year when the stock market does poorly, can increase your chances of success by quite a bit going forward. And, to the extent that a retiree has flexibility, we would say to think about it that way, whether using kind of our formula or just more generally speaking.

Amy Chain: And I think our viewers this evening can find more about the Dynamic Spending principle on the website. Another thing I want to send our viewers to on our website, is an asset allocation video that can help answer some of the questions that we’ve talked about this evening. So check it out on, also, in the Resource widget and, hopefully, you find it helpful.

Okay, let’s go back to some of these fundamental questions. What are some of the most common mistakes that people make when they’re planning for retirement? Kevin?

Kevin Miller: I would say, one that you see a lot, especially now, given that the market’s done really well is performance chasing. So, you see it a lot at year end or beginning of a new year and people will look at okay, here are the funds that have performed really well recently, and that’s how they make their investment decision, without really taking into account how do those particular investments fit into what it is that they’re trying to accomplish. Are they way too risky for them? They just look at that return number and that’s what they decide to go with, and that’s not the best way to allocate a portfolio.

Amy Chain: Another question we get all the time let’s tackle it right now. Donald is asking, “How often should you rebalance your portfolio?”

Michael DiJoseph: So, we would say maybe it’s not so much about how often you rebalance it. It’s how often you look at it and what it looks like when you do. So, Vanguard’s got a methodology. What we would do, we would say, if you’re high-level allocation, so, basically, between stocks, bonds, and cash, if that’s more than 5% away from your policy allocation, so if you’re a 60/40 investor, and you know 60% stocks and the stocks—

Amy Chain: As based on the questions you’ve already asked yourself about risk tolerance, time horizon.

Michael DiJoseph: Right. If you’ve landed on that and it kind of goes back to that discipline. All right,, it’s rebalancing. You should presumably spend so much time on the plan in putting it all together that it would be a shame not to stick with it, and so rebalancing is a way to do that.

Now, it can be hard, right? When the stock market’s going up, it involves selling things that have done really well to buy bonds, but we would say that the best way to kind of capture the trade-offs without creating tax disadvantages and things like that is that if it’s out of whack by more than 5% or so.

Amy Chain: Now we’ve talked a lot about stock versus bond allocation. Candace is asking us, “Among a stock allocation, how should one consider their investments?” So maybe we could pause to talk a little bit about what comprises the equity markets and then share a few thoughts on how we think investors should think about allocating among the asset classes.

Michael DiJoseph: Sure, so well, at the highest level, there’s U.S. and international. At any given point in time, the U.S. market is about half of the global market cap and so by market cap, we mean the capitalization of the entire global stock market. So on that side, our you know kind of our advice we’d say somewhere around 40% international of your equity allocation is where you capture most of the benefit of diversification without kind of, you know, hitting the other side of the trade-offs.

Now within any equity allocation, there is also a way to look at it as far as size. So, there’s small, medium, large stocks. There’s growth and value and things like that. And so we would generally say buy the market in the proportion in which it is priced. So, it’s called market cap, kind of our traditional indexing. So, the S&P 500 is an example, the index will go and buy proportional to its size in the market in each of those things. Any decision away from that is kind of taking on an active bet.

Amy Chain: How often do you get this call from a client saying, “I’m about to panic, what do I do?” And what do you tell them when they call.

Kevin Miller: Yes. It’s on a pretty regular basis, and you know again, it really ties back to having that plan in place ahead of time. When we’re managing assets for clients, we feel like it’s probably the single biggest benefit that someone gets from working with an advisor is helping them realize that the allocation that they’re in is appropriate because timing the market is virtually impossible. And what happens is if you make those choices, inevitably what happens is people, even though fundamentally we know buy low, sell high, investors want to do the opposite. They want to sell once the market’s already declined, and then they want to buy back in once it’s already increased in value. And so, by doing that, you’ve locked in losses and then you fully don’t get to participate in the gains, and not really in your best interest by doing so. So keeping that just very simple rule buy low, sell high which investors want to tend to do the opposite. So, if you can just remember that, you’ll be pretty well off.

Amy Chain: We would prefer to say have a plan and stick to it.

Kevin Miller: Absolutely.

Michael DiJoseph: I would say it helps to have a written plan. Especially at a time like that, it’s one thing to say well I plan on not selling when the stock market goes down, you know. But when that happens, it’s a whole other thing. If you have it in writing, you can actually have that as part of your plan that, hey, I’m not going to change if the market goes down. In fact, I’ll rebalance. So the stock market’s going down you’re actually buying more of it. But we’d say having that in writing and kind of proactively sticking to it is kind of a tactic to do if you don’t have an advisor.

Amy Chain: I’ve also heard us say don’t just do something, stand there.

Michael DiJoseph: Yes. That’s a Mr. Bogle classic.

Kevin Miller: Also, what happens is I’ve seen it a lot with our clients, they make those changes, and then they don’t think about getting back into the market then. They’re like well I’m going to wait until it goes down again or goes down further, and we’ve had this really long period of really great market returns and there are people that have been cash for years because they simply can’t bring themselves to make an investment even though they would have been far better off doing it. So, it’s not only about getting out, it’s how do I get back in again which is a whole other—

Amy Chain: You got to be right twice.

Kevin Miller: You got to be right twice, exactly, and it’s a whole other set of problems that people don’t necessarily think through when they make those changes in the moment.

Amy Chain: How about for those that do have a lot of cash. If you’re sitting on the sidelines, you have too much cash for this reason or some other, what would be a strategy for getting back into the market particularly when the market feels so inflated right now?

Kevin Miller: Yes. It’s something that I’ve heard consistently from investors for a while because we keep hitting new highs, and it doesn’t mean that the market won’t continue to go higher. So, generally, we tell clients to get the money invested, but if not, have a plan to get it invested. And if you can automate that process, it can be a really great thing because then you take the emotional part out of it because when you try to use, I always call it the eyeball method, where you’re trying to base it on when the market, if it goes down a little bit, well inevitably something always happens around that time and you don’t get around to doing it, and then you look back six months later and the money is still in cash. So, you know having a well thought out plan, especially if it’s written about this is how I’m going to get the money invested and here’s sort of my end point, then you sort of remove all the uncertainty about doing that.

Amy Chain: We’ve often talked about one of the values that a partnership with an advisor can be is this behavioral coach aspect. They can help guide you to make the choices that you might not make without a little help from a friend. Right? I want to remind our viewers that we have more information about Personal Advisor Services® in the Resource widget. So, if you’d like to learn more, please check it out.

Okay, William from Illinois is 70 years old and he is asking, “What is important for him to be thinking about right now?” I guess we can make a presumption that William is at least closer to retirement if not in retirement. We’ve answered this question a couple times, but given that it keeps coming up, let’s tackle it again. Mike, we haven’t heard from you for a while.

Michael DiJoseph: Sure. So, one thing that pops into my mind is thinking about the flexibility that they can kind of build into the plan. So, we talked about the Dynamic Spending Strategy a little bit. It’s really understanding, especially if he is retirement, you know how can you kind of adjust your lifestyle to kind of built in some of that flexibility. That’s kind of the first thing that pops into my mind there.

Kevin Miller: I would also add in that at 70 1/2, if they have any sort of tax-deferred accounts like IRAs or 401(k)s, they’ll have to start taking out a required minimum distribution (RMD). So, that’s something that should be on your radar, as well as there’s rules that are relatively new around if you have charitable intent, you can sometimes use those to do what’s called a qualified charitable distribution to help your tax impact in any given year. So, something really simple like that can come up around that time.

Amy Chain: Something we haven’t talked about tonight that we’re getting a lot of questions about are ETFs. Maybe we can start just first by addressing what is the difference between an ETF and a traditional index fund. Mike, you want to kick us off?

Michael DiJoseph: Sure. Yes. So, ETF stands for exchange-traded fund and just like a mutual fund, it’s a basket of securities. So, for example, the S&P 500, it’s a fund that holds all 500 securities in their proportion of the market weight.

Now the difference is with a mutual fund, now the way it would work is, if I wanted to invest in a mutual fund, I would go to say Vanguard, for example, and I would buy the mutual fund directly from Vanguard. Vanguard would take my money, go out in the market and buy all of those securities and then give me a share of the mutual fund in return.

Now the way an ETF works is very similar. It’s that pool, but it’s already out there and you basically buy it on an exchange like a stock. And so, I would say the biggest difference is that mutual funds are priced at their NAV, which is the net asset value, the total of all the prices of all the securities at the end of the day. That’s what you transact at and you can only transact at the end of the day, meaning you put in your order and it gets executed when the market closes. An ETF, you can buy it and sell it all day long. Of course, there are pros and cons to that.

Now here at Vanguard, actually, the vast majority of our ETFs are actually index funds. So the question was the difference between an index fund and an ETF, I think about 95% of the ETF market is indexed. Where the similarity ends is that, you know, there is a possibility to kind of trade in and out of it whereas with a mutual fund, people tend to hold to much longer.

Amy Chain: Traditionally, let’s talk about cost. I don’t want to jump to the conclusion. Let’s talk about how cost is often considered when you think about should I invest in an ETF or an index fund? Is it really about ETF or index fund or is it about—

Michael DiJoseph: So, the numbers will say that ETFs on average are cheaper than mutual funds, but I think that the big reason is that the vast majority of ETFs are index funds. So, I think it’s that index funds tend to be less expensive in most cases than active funds. So, you know, they’re both very low at this point especially for the higher quality index funds and ETFs.

Amy Chain: Kevin, what are some of the most frequent questions you get from clients about ETFs?

Kevin Miller: Yes, it’s around just general knowledge; and it’s something that they’ve heard a lot about because ETFs have become pretty popular over the last few years and it’s “Is this something I should be thinking about?” They may have a portfolio that holds a lot of index funds, so they’re getting a lot of the same exposure, so it may not be something that they need; but they just want to make sure that they’re not missing out on something that they keep hearing so much about.

Amy Chain: Let’s answer a question for someone who’s just getting started out. I was excited to see that we had a portion of new investors joining us this evening as well.

Brendan is 18 and in college. Brendan is curious to know some ways that he can make sure that he continues investing but still afford life. Maybe some percentages of income to invest monthly.

I think the first thing we all have to say is, Brendan, congratulations on thinking about this, congratulations on being in college, and even starting to think about how you might take income and set some of it aside for later. What do we have to say to Brendan?

Michael DiJoseph: Congratulations for having extra income while you’re in college, I would say. But, you know, I think the way to approach it is to actually sit down and create a plan. Right, look at what are your expenses? And I know expenses can be very high in college, not even accounting just for the tuition for everything else. So if there’s money left after that, I would say save as much as you possibly can. I mean I always say, start as early as you possibly can to take advantage of that magical power of compounding.

Kevin Miller: And I would say even potentially starting with savings as sort of a given and using that as opposed to looking at what’s leftover at the end. You know, paying yourself first. With college, it’s probably really difficult. I remember those days pretty well. Investing was not on my radar at that point, but if you’re able to do that, just like Mike said, the ability to compound and have it grow over time is phenomenal.

Amy Chain: Yes, the first thing I think to do is to save and save often, right? Save and commit to saving, and then once you’ve started to do that, then you can start thinking about where and how to invest this money.

Michael DiJoseph: Yes, and I think it starts a lifelong habit for starting that early.

Amy Chain: I’ll tell you that 16-year-old Amy put a little bit of money aside, and 25-year-old Amy, when it came time to buy a house, was very glad she did so. So, Brendan, save!

Andrea is asking, this is a great question for the sort of midcareer savers with so many priorities and not quite sure what to do about it. Andrea says, “Should I pay off my debt before investing for retirement or should I invest in an emergency fund or leave a low interest saving account?” Kevin?

Kevin Miller: Yes, it’s a question I get a lot, and sometimes you can work out the math and see, okay, if I’m investing and I’m making X percent and my mortgage is Y, and one’s greater than the other, you can sort of figure out what’s better off. There’s always that emotional component to it as well. So for someone not having that debt and saying, “If I have this mortgage paid off, it gives me extra cash flow and it gives me more flexibility in life, so that’s what I’m going to focus on.”

So there’s generally not, I think, a right or wrong answer there. It’s what’s more important to you. And, again, what’s the rate that you’re paying on the debt that you have?

Michael DiJoseph: I would say probably focus on the emergency fund first though, given that it is for emergencies, right. If an emergency were to arise, you’d rather have that there than maybe a little bit lower balance on some of the debt.

Amy Chain: Very true. Okay, let’s talk about our recommendation for adjusting a portfolio to a more conservative approach when there could be high capital gains incurred. This question comes from Steven in Maryland. This is another big one that we get quite often. Kevin, kick us off.

Kevin Miller: Absolutely. So we feel pretty strongly that you shouldn’t let the tax impact dictate what it is that you’re doing from an asset allocation standpoint because if you sell something off, you pay something in tax, a lot of times that could be significantly less than if you allow things to just grow uncontrolled over time. The market has a big pullback, and now your losses are more significant than they would have been otherwise and potentially bigger than the impact that you would have paid by having those taxes.

So it can be hard; and, again, it’s another one of these emotional decisions that we come across. But, again, not allowing the tax impact to dictate what you’re doing is really important.

Michael DiJoseph: And I’ll say a practical strategy to approach that, and something we didn’t talk about when we answered the rebalancing question, is using the portfolio cash flows, so if you’re at a certain allocation and you want to be somewhere else, maybe instead of reinvesting all the dividends, reinvesting the income on the bond side back into those funds, you can actually kind of divert those funds to that. So if you’re trying to reduce your equity exposure, for example, taking your dividends and using those dividends to purchase bond funds to kind of get to that target without actually selling an asset.

Amy Chain: Let’s also go back and answer a question that’s probably most pertinent to some of those watching this evening that are really just starting out and trying to figure out how to do this investing thing. Asset location we didn’t talk about, so we’re talking about capital gains and how you should deal with them, but maybe what’s the first right step to take?

Michael DiJoseph: Yes, that’s one of my favorite topics. So kind of how we were talking about with the municipal bonds, so what we call shelf space, meaning space in a tax-deferred account.

So the first thing you need to think about is your asset allocation and the funds that you’re using it to implement it, how tax efficient are they? So what we know is that on average, indexed equity funds tend to be very tax efficient because they don’t trade a lot, so they’re not kind of kicking off these short-term gains that are taxed at a higher rate. So to the extent that they’re paying dividends or they’re paying capital gains, they tend to be long term in nature, which are taxable at the capital gains tax rate, which is usually lower than the marginal tax bracket.

So, you know, if you have indexed equities and then you have maybe active equity funds, which tend to, especially if they’re doing well, they tend to kick off a lot of taxable gains or something like a taxable bond fund where the vast majority, the return from a taxable bond fund is taxed at your marginal tax bracket. We would say try, to the extent that you can, to put those in those tax-advantaged accounts and take most advantage of those things. And we know it’s hard, but it’s something that if you start working on early, it could pay significant dividends, kind of without taking on extra risk over time.

Kevin Miller: Yes, and I would say even splitting a little bit further, if you have money in a traditional rollover IRA and a Roth, again, a lot of it’s going to depend on capacity or shelf space that you had that Michael talked about before. But if you’re able to put more stock investments inside Roth IRAs, because generally that’s money that you would spend from first, so if stocks are in there, it gives you more time to have that money grow. And then everything you pay out comes out tax free, so you have a larger investment in there; and then all the gains that you’re able to capture come out tax free versus if it was in the IRA account. They come out and you pay ordinary income tax rates. So you can look at that from the difference in the tax perspective and what’s better off long term.

Amy Chain: So if I can summarize, correct me if I’m wrong, you want to put the investments with the highest-tax impact in your tax-deferred accounts and those with the least tax impact in the accounts that you’re going to have to pay taxes on every year. Good summary?

Kevin Miller: Yes.

Amy Chain: Okay, follow-up question on the emergency fund. What is a good amount to have in your emergency fund?

Kevin Miller: I can tackle that one. So Vanguard, we don’t have any sort of set amounts, just because it’s so different investor to investor. So you want to take a look at if someone that’s in retirement, how much are you spending on any given year? Sometimes people have multiple years’ worth of money in cash because that helps them sleep at night. Also, taking a look at what other large expenses, are you going to buy a car, the home purchase, do you have a wedding to pay for, all those things could be reasons to have larger cash positions. You know, anything that you’re going to need, even within a few years, I think you could make the argument of having that in cash just to eliminate any sort of market risk that’s attached to it.

Amy Chain: Do you recommend that people think about an emergency fund as something different than just their savings account?

Kevin Miller: It depends. Some people use sort of just one account for simplicity. Other people will break it up and say this is my spending fund or my emergency fund, and then something else that’s for a separate goal that they have if that helps them from sort of the mental accounting aspect of it. But it’s really up to them.

Amy Chain: Another question we haven’t tackled yet, stock related, but how should investors be considering U.S.-based stock investment versus foreign stock investment? Mike?

Michael DiJoseph: I think the way to look at it is that something’s always going to be doing better than something else. By definition, I mean something’s always going to be doing worse than something else.

Amy Chain: Better is always a relative term.

Michael DiJoseph: Right, there’s always like market timing. There’s kind of two sides to that coin.

So, you know, this is kind of the fundamental of diversification. So if you have a little bit of everything, you kind of, you participate in the gains when things are doing well; and you mitigate the losses when they’re not. We know it’s really difficult to predict when those things are going to happen, so again our research would show that, on kind of the upper limit, we’d say probably no more than 50% of your equity holdings in international, but for most people somewhere around 30% or 40%. And that’s kind of what we do, for example, in our retirement funds that we create for people is one solution. We’ll do 40% international there.

But we do, you know, I will say we do get, maybe you get this with your clients, but when we hear people say, “Why do I need to invest in international stocks when all the companies in the U.S. are doing business globally anyway?” And our answer to that is, you know, the research would show that most stocks actually perform more similar to the country in which they’re domiciled than in which they do the majority of their business.

Kevin Miller: Yes, and I would say, again, something that I talk to clients about a lot, especially with international these last few years, underperforming U.S. stocks; and I don’t know that there was anything pre-2017 that would have led investors to believe that international stocks were going to do really well. But now I get a lot of questions around, “Hey, what about international stocks?” And, it’s, again, being diversified ahead of time because if you’re investing in them now, you’ve missed out on all those gains. So it’s about having something that’s well-diversified ahead of time so that regardless of what does well, you already have some dollars allocated there.

Michael DiJoseph: You know, that actually brings up another conversation that I have as well, and that’s kind of what you’re comparing yourself to. What’s your benchmark for success? So we’ll hear a lot of people say, “Well the U.S. stock market was up 10% or 15%, but my portfolio wasn’t because oftentimes it’s, “Well, you have bonds and you have international and things like that.” So we actually say, “Think about your benchmark is your kind of required return, so what return do you need to meet your goals,” and benchmark yourself against that instead of just seeing what’s out on the news because, again, there is always going to be something that’s doing better; and that will tend to be what gets the most attention. So I think that’s something that kind of goes back to this, like the behavioral coaching and the psychology of investing, that you have to set a reasonable benchmark for yourself and stick to that and benchmark yourself to that rather than just whatever’s doing the best at the time.

Amy Chain: Lisa is asking a question. We talked a little bit about this earlier, but let’s take it a little bit further. Lisa has a 3-year-old daughter, and she is interested in investing for her future schooling. What are some of the ways that Lisa should be thinking about this?

Kevin Miller: Sure, so I would say probably the biggest one that we talk about is the 529 plan, just because it gives you the best tax advantages so you’re able to put money in, depending on the state that you’re in, you may get a deduction for that, the money grows, and then you’re able to take it out in a tax-advantaged way if it’s going toward college expenses. So there really are some significant benefits there, especially for a child that’s 3 years old, having say 15 years, plus maybe a few years until the child’s in college, so you have a relatively long time horizon where you can really save and have it compound over time.

Amy Chain: And there’s a big difference between saving and a savings account and saving a 529. I’m not sure that all parents really think that through. If you save in a savings account, you potentially miss out on some of the market growth that you could take advantage of when your child is young and you have such a long time horizon.

Kevin Miller: Absolutely, and it’s really important because especially with college and the way that the costs are growing, unlike retirement where you made 6% on your money and it’s great, that’s all yours. Well, you save for college costs and you made 6%, but college costs went up 6%, it’s really hard to keep pace, especially if you’re in a savings account where you’re not making a whole lot. You know, the money’s secure, but trying to keep pace with the growth or the inflationary pressures is really, really tough with college savings.

Amy Chain: All right, Steven from Haddon Heights, New Jersey, says that he has a 401(k) with his employer, as does his spouse. We’re looking to retire in 14 years he says. What is the best strategy for investing in our future to maximize growth over the next 14 years? Kevin?

Kevin Miller: Sure. So, again, I think maybe not focusing so much on the growth aspect but sort of how it fits in with everything else and making sure that you’re not trying to make up for lost time by being too aggressive and then you end up hurting yourself and being even farther behind if the market were to decline. So looking at all the factors, you know, the ones that we talked about as far as your savings rate and when you’re planning on retiring and how they all work together.

Amy Chain: I think that’s the last question we’ll be able to get to tonight, but I’ll give you both an opportunity to share some thoughts before we say good evening. Kevin, I’ll kick it to you first.

Kevin Miller: Sure. I would just really say about having a plan and just, importantly, sticking to that plan over time.

Amy Chain: Mike?

Michael DiJoseph: Yes, and I would say start early. I have younger siblings, and I tell them all the time. You know, I say, “If you wait five years to start saving, that means you’re going to have to work an extra ten years.” Whether that’s exactly true, I’m not sure; but I think it tends to have an impact.

Amy Chain: You make a compelling point about the power of compounding, right?

Michael DiJoseph: Yes.

Amy Chain: Well thank you both for joining us. Thank you all for tuning in this evening. We’ve had a great time. In a few weeks we will send you an email with a link to view highlights of tonight’s webcast along with transcripts for your convenience. And if we could have just a few more seconds of your time, please select the red Survey widget. It’s the second one from the right at the bottom of your screen and respond to a quick survey. We really appreciate your feedback, and we welcome any suggestions about topics you’d like us to cover.

So from all of us here at Vanguard, thank you for joining us and good evening.

Important information

For more information about Vanguard funds or ETFs, visit to obtain a prospectus, or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

For more information about any 529 college savings plan, contact the plan provider to obtain a Program Description, which includes investment objectives, risks, charges, expenses, and other information; read and consider it carefully before investing. If you are not a taxpayer of the state offering the plan, consider before investing whether your or the designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program. Vanguard Marketing Corporation serves as distributor and underwriter for some 529 plans.

All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. 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.

Investments in bonds are subject to interest rate, credit, and inflation risk. While U.S. Treasury or government agency securities provide substantial protection against credit risk, they do not protect investors against price changes due to changing interest rates. Although the income from a municipal bond fund is exempt from federal tax, you may owe taxes on any capital gains realized through the fund’s trading or through your own redemption of shares. For some investors, a portion of the fund’s income may be subject to state and local taxes, as well as to the federal Alternative Minimum Tax.

Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk. Past performance is no guarantee of future returns.

When taking withdrawals from an IRA before age 59½, you may have to pay ordinary income tax plus a 10% federal penalty tax.

This webcast is for educational purposes only. We recommend that you consult a tax or financial advisor about your individual situation.

The Vanguard Charitable Endowment Program (“Vanguard Charitable”) is an independent public charity founded by Vanguard. Although Vanguard provides certain investment management and administrative services to Vanguard Charitable pursuant to a service agreement, Vanguard Charitable is not a program or activity of Vanguard. A majority of Vanguard Charitable’s trustees are independent of Vanguard.

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.

© 2017 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corporation, Distributor.