Yearly Archives: 2009


The “pink slip” risk in retirement planning

I’ve mentioned in several previous posts that the anxiety about 401(k) balances has been largely overstated, in part because of the beneficial effects of ongoing contributions and diversified portfolios. This point has come across as Pollyanna-ish to some of you, … Read more


How Paul Samuelson helped inspire index mutual funds

Paul A. Samuelson, who died December 13 at age 94, was rightly remembered as a brilliant educator, as author of the best-selling economics textbook ever, and as the second recipient of the Nobel Prize in Economic Sciences. Professor Samuelson, the … Read more

Personal finance

If it sounds too good to be true …

I’ve written about financial fraud involving seniors before, and it remains a serious concern. Unfortunately, there’s not much we in the investment industry can do beyond warning our clients to be vigilant and working through issues when they arise. As … Read more


Going overseas without going overboard

The idea of holding a portion of your portfolio in non-U.S. stocks has been around for quite some time, but the ways in and reasons for which it’s put into practice have evolved.

At first, the addition of non-U.S. stocks … Read more


Another look at 401(k) accounts

I elicited some grief from certain Vanguard Blog readers by talking about a recovery in 401(k) accounts earlier this year. Allow me to provide an update on the issue.

Recall my basic premise: As a result of ongoing contributions, … Read more


The record date: Not a tune you can dance to

Every year, many investors find themselves “buying a distribution” and incurring liabilities that could have been avoided or at least deferred.

Tax law requires that realized gains in a portfolio be distributed at least annually, typically in December. If you’re … Read more


Why we advertise

It’s a question we hear from time to time on this blog, as well as through e-mails, letters, and phone calls: “Why does Vanguard advertise?”

It’s a fair question. And believe me, it’s a topic debated vigorously by Vanguard’s leadership … Read more


Considering conversion?

The issues aren’t quite the same as those one faces when considering the deepest aspects of personal faith and religious doctrine, but a “Roth conversion” can pose some difficult issues for investors nonetheless. And we’re going to hear much more … Read more


Time to think about year-end tax moves

We’re coming to the close of 2009. It’s been an eventful year, a year of change, and over the next few weeks you’ll be seeing a lot of articles putting it all in perspective.

It’s also the close of the … Read more


Stocks and time

Jeremy Siegel has a recent piece in the Financial Times that restates his view that stocks are the most appropriate investment for investors with a long horizon. I wonder how most of you look at this issue, especially after the … Read more

Personal finance

Here today, gone tomorrow?

You see it all too often: A caretaker is arrested for stealing funds from a senior under his or her care. What you don’t see as frequently—though I believe it’s a great deal more prevalent—is family financial fraud, primarily targeting Read more


Cognitive skills and financial choices

How does your ability to make financial decisions change over time?

One research study suggests that, across the population, financial skill follows a hump-shaped pattern. In our youth, we start with low levels of financial knowledge. Over time, our ability … Read more


401(k) performance: The numbers add up

I’m a little tired of reading about how “buy and hold” is dead, and diversification doesn’t work, and how “target-date funds don’t work,” and that there was too much risk, especially for pre-retirees, in these balanced funds. These stories seem … Read more


Coming soon: More of a good thing

There’s a savings vehicle in which all earnings, appreciation, and interest can be free of income tax forever. If the rules are met, there’s no RMD to be taken, no income tax due on withdrawals, and, while the account assets … Read more


Do you have the bond gene?

One of the smartest people I know—a brilliant copy editor—used to shake her head as she read articles about bonds and the bond market.

“I think you have to be born with the bond gene to understand bonds,” she would … Read more


Bad facts, bad story

There are only two reasons you appear on the cover of Time magazine—either you are receiving plaudits from the media, or you’re about to be tarred and feathered. 401(k)s are featured on the cover of Time this week, and it’s … Read more


Death and taxes

Ben Franklin definitely had it right when he said that nothing is certain except death and taxes. And you can be sure that as we get closer to the end of the year, we’ll hear lots of discussions on tax … Read more


Boomer market meltdown?

Should you invest differently given the impending retirement of tens of millions of baby boomers? This is a question I’ve received from advisors and investors in recent weeks, and one which, quite frankly, I’ve given little thought to throughout the … Read more


Active or passive?

In 1976, Vanguard launched its 500 Index Fund, making it the first index mutual fund available to non-institutional investors. The creation of an index fund intended for individual investors was an important salvo in the now long-running battle over … Read more


On self-reliance

This comment on Steve Utkus’ recent post about retirement struck a major chord with me:

“Our children’s incomes are not increasing, and they have their own children to support, let alone saving for their own retirement. No one is to … Read more


Health costs in retirement

The national debate on health reform has me thinking about a particular angle of the question: paying for health care in retirement. Let’s put aside for the moment long-term care costs (i.e., nursing homes) and focus on regular medical care—doctors’ … Read more


Rebalancing: What’s your trigger?

You probably know that Vanguard advocates periodic rebalancing as a way to manage risk in investment portfolios.

Our Investment Counseling & Research Group, overseen by my fellow blogger John Ameriks, has written a detailed white paper on rebalancing. John weighed … Read more

Personal finance

We’re wired. Is that a good thing?

We Google, we Tweet, we LinkIn, we “friend” each other, and we log on to the Internet at ever-increasing rates.

Findings from the Pew Internet and American Life Project have shown that our current economic woes have carried over into … Read more


At the risk of sounding like a broken record …

I realize this will be about my third post on this issue, but the things people are writing about 401(k)s just get more and more absurd, and it’s tough to sit by and let this go unchallenged.

Now the editors … Read more


The retirement oil tanker

Each year in August we publish a compendium of statistics about 401(k) plans administered at Vanguard. As the report covers over 3 million American participants, it often generates a lot of interest from the media, policymakers, consultants, and employers. (You’re … Read more

Personal finance

Who’s looking over your shoulder?

I’m a list maker. I carry around various lists for different parts of my life, and add and delete as I work my way through the tasks. While much in my life has become digital, I always write these lists … Read more


Hitting the right notes with your investment strategy

For 35 years I’ve carried a quotation in my wallet. More precisely, I’ve moved the quotation, clipped from a now-defunct newspaper, from wallet to wallet to wallet over the decades.

The quotation is from Willa Cather’s “O Pioneers”:

“There are … Read more


The pros and cons of an IRA rollover

I recently participated in a live webcast attended by a number of Vanguard retirement plan participants. The topic was retirement investing, and questions came fast and furious. We answered as many as we could in our allotted 30 minutes.

One … Read more


A standing ovation for a financial innovation

There’s been lots of talk since late last year about the plusses and minuses of financial engineering, including a debate (see blogs by Felix Salmon and Tyler Cowen) about the overall merits of various modern financial innovations. While it’s … Read more


Retirement: ready or not?

We were vacationing last month in Scotland. At a small country hotel—on a misty Western isle—I mentioned to a group of guests that I conduct research at Vanguard on retirement issues. You guessed it: Suddenly the conversation shifted from the … Read more


Finding balance in stormy seas

Of all the generally accepted investment concepts called into question by the recent market environment, it seems to me that rebalancing is pretty close to the top of the list.

During late 2008 and early 2009, rebalancing your portfolio to … Read more


Crunching the numbers on retirement

You were getting close to retirement, and you’d thought you’d saved enough.

And then the market tanked.

So, you decided to stick it out and try to regain what you’d lost. Other changes to your portfolio structure or your investing … Read more


401(k) loans: Are you really taxed twice?

Following my recent post on 401(k) loans, a number of you asked for more detail on the rules around taxes on plan loans and repayments. So I thought I’d delve deeper into the topic of being (or not being) … Read more


Lessons from the Busted Flush Investment Club

Nearly 20 years ago, I helped a group of friends start an investment club.

We were regulars at a friendly poker game, so we named our venture the Busted Flush Investment Club. My hope was that I could interest these … Read more


Yesterday’s news

Steve Utkus, one of my fellow bloggers, wrote recently about the dubious value of a local radio station’s early-morning reports on where the S&P 500 and Nasdaq markets are likely to open the day, based on futures trading. He labeled … Read more


Target-date risks

Criticism of target-date funds is heating up in the aftermath of hearings by the SEC and the Department of Labor. But rather than illuminating the retirement investing problem, the discussion has only highlighted a yawning deficit in the public debate.… Read more


Your 401(k): Nest egg or slush fund?

One of our readers recently asked about Vanguard’s view on 401(k) loans.

As you might know if you’ve poked around, we generally frown upon retirement plan loans, to put it mildly. In fact, Vanguard’s intranet for employees recently featured … Read more

Personal finance

Your comments, please

From the day we launched this blog in March, we’ve received plenty of feedback on our policy of not publishing readers’ comments.

Most of you, it’s fair to say, wished we would change the policy. Well, I’ve got some news … Read more


Retirement? What retirement?

Faced with a reduced (but recovering—so far) portfolio, children still in college, and not a clue what else I would rather do, I’ve given some thought to simply working forever. Not a bad plan, if I can manage it.

Many … Read more


Peter L. Bernstein, 1919-2009

The vast majority of what you read and hear about investing focuses on returns. As in, what mutual fund, or stock, or asset class investors ought to buy now to garner the best return for some indeterminate period. Or which … Read more


The sound of cannon

Apparently the Rothschilds, the great banking family, had a saying about when to commit capital: “Buy at the sound of cannon; sell at the sound of violins.”

Although they probably were thinking about political instability, the saying has a contemporary … Read more


“Mattress risk”

Given the recent market crisis, we’ve heard a lot about how the “only safe place” to invest your money is your mattress.

One of my colleagues forwarded me this story from CNN. It’s about an older woman who had … Read more

Personal finance

“Generation D” redux

Thank you for all of your comments on my “Generation D” blog post. We heard from students, recent grads, parents, and investors. Your comments were insightful and passionate, and pointed to several major themes.

Some of you admitted to, or … Read more


If your mother says she loves you …

I’ll admit it’s a stretch for investors to find something positive from the past 18 months or so. But perhaps one plus is that a number of investing beliefs are under examination, and that many of us are reconsidering our … Read more

Personal finance

Don’t fool yourself about volatility

My wife and kids are off visiting our relatives in Tokyo, and so I’m at home alone for the next couple weeks, reliving my bachelor days for a little while. Plenty of cold pizza for breakfast!

In place of the … Read more


The new retirement math

For retirement investors, the weak 10-year track record of stocks means it’s time to renew a focus on the economics of retirement. The math is pretty simple, at least at a high level:

Contributions (C) + investment returns (R) = … Read more


You can go home again, but will you?

Federal Reserve data indicate that between January and early May, bank savings deposits rose by almost $170 billion. At the current rate, new deposits for 2009 will exceed those in 2008, which totaled almost $330 billion.

Clearly, you’re voting with … Read more

Personal finance

Questioning a financial rule of thumb

The idea that you should have a cash reserve equal to three to six months of your living expenses would almost certainly make any “Ten Commandments” list for personal finance.

It might also be one of the least obeyed commandments, … Read more


A premature obituary for “buy and hold”

From the Wall Street Journal (subscription required) to the cartoon people interviewed on TV with zippy music, a recent theme in the financial press is that it’s “madness” to build a portfolio using the traditional method of setting an asset … Read more

Personal finance

Generation D (for debt)

Graduation season is upon us. Many of us have children, grandchildren, or acquaintances sailing out of school … and hitting pretty rough seas in the job market.

I had planned to speak to my sons about investing once they graduate. … Read more


“201(k)” revisited

My recent blog post on 401(k) accounts has generated controversy among some Vanguard investors.

Perhaps the biggest complaint was that I was trying to distort statistics by focusing on the change in 401(k) account balances during 2008. The evolution of … Read more


My “spin” on laundry … and investing

We spent part of last weekend looking for replacements for our old washer and dryer, which definitely were on their last legs. In doing a bit of research before heading for the appliance store, I found an unexpected parallel with … Read more


True retirement confidence

The headline from a recent survey conducted by the Employee Benefit Research Institute (EBRI) says it all: Only 13% of working Americans are “very confident” they’ll have enough money for retirement.

That’s the lowest level on record for the survey. … Read more


Retired? Make the best of a bad situation

As Americans, we’re accustomed to having options. There’s always another answer, another solution, another way to lick a problem. (Sometimes, though, I think that’s how we got ourselves into the mess we’re in right now. Don’t have the money? Charge … Read more


Setting the record straight about 401(k)s

A piece that aired last week on “60 Minutes” has gotten some attention and a lot of play from those arguing that a retirement system based on 401(k)s or other investment accounts is fundamentally broken.

But I couldn’t disagree more … Read more


Levers we can control

One of the biggest frustrations for investors is that there is one huge factor no one can control—the returns that the financial markets are going to provide in any given stretch of time.

When we first start investing, we probably … Read more



Has your 401(k) become a 201(k)? That’s a pretty common joke these days, as financial commentators look for new ways to talk about plunging markets—and plunging 401(k) balances.… Read more


Saving for retirement: What’s the priority?

Retirement … retirement … retirement. Most of us are painfully aware that the responsibility for providing for ourselves in retirement rests squarely on our own shoulders. If we didn’t fully appreciate this sobering situation before, we certainly do now.

Retirement … Read more


Retirement: Don’t reinvent the wheel

On March 31, I was in New York City as a member of a panel speaking with a group of financial advisors on the issue of retirement income. Being back in the city brought back a lot of great memories, … Read more

Economy & markets

What’s changed, and what hasn’t?

I’ve had a hard time deciding which way the economic and investment winds are blowing, so I decided to make a list of the things I think have changed and those that haven’t.… Read more


Junk news

Driving through the Pennsylvania countryside at 7:30 one morning, here’s the news I hear on the radio (read breathlessly): “And in the morning business news, Dow futures are down 300. S&P futures down 40. Nasdaq futures down 80.”

I’m amused … Read more

Personal finance

The experts (you!) weigh in on saving strategies

In an earlier post, I asked readers to share techniques that have helped them to save. After all, spending less than you earn is the essential first step in investing. Vanguard shareholders tend to be people who’ve long made … Read more


On the virtue of keeping it simple

The impact of unnecessarily complicating our lives became clear to me this weekend.

With 260,000 miles on our two cars, we decided this was the time to get that new car we’ve been talking about. We did the research, bought … Read more


Lessons from the “lost decade”

Here’s a table that codifies the pain of investing over the past decade. It compares the results of investing in several asset classes under two scenarios: A $10,000 lump-sum investment at the beginning of the decade, and a regular $1,000-a-year … Read more


The deal of a lifetime?

At the risk of giving away my age, I'll tell you that buying stocks right now could be the deal of my lifetime.… Read more

All in, or bit by bit?

Dollar-cost averaging forces the discipline to continue to invest in good times and in bad.… Read more

Thank you, Jon Stewart!

At long last, someone called Jim Cramer out. It wasn't the mainstream press. In fact, it was one of the leading faces of the "fake" press, Jon Stewart.… Read more

Forecasts and second marriages

Even from its recent lows, the S&P 500 Index would have to drop another 30% or so to get back to the level that had me counseling caution back in 1995.… Read more
Economy & markets

The next Depression?

Mark Hulbert (with some help from Jeremy Siegel) does a nice job correcting the record about how long it took for stock market investors to "recover" from the Great Depression.… Read more

The trouble with bubbles

The history of bubbles is a story of excessive enthuasisms, for anything from tulip bulbs to subprime mortgages. But is there something more fundamental at work? Something more innate and psychological? It seems to me there is.… Read more

Making the right move

The idea of not making any market moves is based on the assumption that before the bear market started and the recession kicked in, you were rational and had put together a balanced portfolio -- diversifying your risks and reflecting your risk tolerance.… Read more
Economy & markets

The 1930s all over again?

Is it the 1930s all over again? If that were true, it would be one very good reason to panic, sell everything, and put your money in a mattress. But it turns out that the comparisons between today and the Great Depression are (mostly) bunk.… Read more

Thrift is the new black

High up on the financial "what's out" list in 2009 is "leverage"—borrowing money to make a bigger bet, whether on housing, commodities, currencies, collateralized debt obligations, or corporate buyouts. … Read more

Putting a price tag on risk

The market is trying to reprice the economic system in the United States.… Read more

Five things every retiree should consider

My "Top Five" list of things for retirees to consider (or at least what I've told my retired parents) includes the following ...… Read more
Economy & markets

Three causes

Trying to understand the global financial crisis? Confused by derivatives and default swaps and the commercial paper market? Here are three ideas to explain it all. … Read more

Too good to be true?

Once again, we read sad headlines about investors misled by an investment manager who had a "sure thing" strategy that led to a devastating outcome.… Read more

Stumbling blocks on the path to perfection

Universal lessons are just that: they apply to everyone, or almost everyone. Sometimes, though, even knowledgeable people stray from what they know to be the better decision.… Read more

Dilbert is an indexer, too

Well, at least Dilbert's creator, cartoonist Scott Adams, thinks that indexing makes more sense for most investors than picking individual stocks.… Read more


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Vanguard ETF Shares are not redeemable with the issuing Fund other than in Creation Unit aggregations. Instead, investors must buy or sell Vanguard ETF Shares in the secondary market with the assistance of a stockbroker. 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.

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Stocks of companies in emerging markets are generally more risky than stocks of companies in developed countries.

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