9 Simple Steps to Profiting at Vanguard

1. Turn off the boob tube and stop
listening to the talking heads.

They’re
more interested in bumping up their
media ratings points than providing
solid investment advice.

2. Make sure you’ve really diversified
your portfolio…

…with big slugs of
both domestic and foreign equities.
Global Equity has had a lousy beginning
to 2008, but it could be the perfect
core fund for someone who can’t
afford a plethora of fund minimums
yet wants both domestic and foreign
shares.

3. Don’t time the market.

You can’t
sell out of the market before it goes
down and get back in before it goes
back up. Market-timing is a fool’s
game.

I can already tell that at least two
clients of mine demanded they be sold
out, only to watch the market move
lower initially, then much higher than
where they started. Neither has called
to get back in, and I’m guessing it’s simple embarrassment.

Not only will
they have to pay taxes on the gains they
cashed out, but now their actions are
looking, well, silly.

4. If you’ve got some cash, put it to
work now…

…not when you’re assured
the markets are going up and everything
looks perfectly calm and safe.
Remember that you were saving it for
a rainy day? Well, it’s not pouring, but
it’s also not bright and sunny on Wall
Street.

5. Reduce portfolio risk if you’re
sleepless.

Not everyone is made
of the sternest stuff. If you’ve been
stressed by the market turmoil and
lie awake worrying about it, then
maybe it’s time to take some risk out
of your portfolio permanently.

To do
that…

…consider trimming stock funds
and adding to your short-term bond
or cash positions.

That said, don’t
overdo it. You need to be able to
handle some short-term pain if you’re
going to earn good long-term gains.

6. Sell your long-term bond funds…

…as
well as Inflation-Protected Securities
and consider a high-yield fund. Junk bonds
may have further to fall, but you’ll
never call the bottom, and this could be
a good time to begin building a stake
here.

Remember, however, the fund has
a 1% back-end load in its first year, so
if you’re not committed to holding on,
you might want to consider a high-yield
ETF, if you can find a good one.

7. Make sure you aren’t overweighting
small-cap stocks.

The best values
right now appear to be in the large-cap
and mid-cap arenas. I’m partial to the
PRIMECAP Management team. If you
can add to positions in their Vanguard
funds, do
so. I’ve added to my personal holdings
three or four times already this year.

8. Don’t measure your portfolio
performance from its absolute
high.

This is the error more investors
make than just about any other.

If you’d known it was going to be the
absolute high on that day you’d have
sold out, right? Markets go up and
down.

Look at how you’ve done relative
to a benchmark like Total Stock
Market or, if you’re really conservative,
Balanced Index. If your longterm
performance has been solid, stick
with your strategy.

9. Stop and smell the roses.

If
you’ve been following my advice over
the years that you should invest in
some of the best actively managed and
indexed funds at Vanguard, then you’ve
done darned well, thank you very
much. You’ve handily outperformed
that market and done so with less risk.

Having a lousy month or quarter? So
what? Investing is a marathon. Leave
the sprinting to those hedge funds that
seem to be blowing up daily. We’re
doing just fine.

As good as Vanguard is (and I have most of my family’s money with them), the fund family has a lot of "secrets" that they keep under lock and key. Accept a risk-free trial subscription to The Independent Adviser for Vanguard Investors, and ach month I’ll bring you independent and unbiased in-depth information on Vanguard funds, including the best funds to buy, advance warning of funds likely to close, changes in management, and much more. Sign up for your risk-free trial subscription right now by clicking here!