consider trimming stock funds and adding to your short-term bond or cash positions. (You can find my favorite short-term fund at Vanguard in your first issue of
The Independent Adviser for Vanguard Investors.) 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.
Sell your long-term bond funds as well as Vanguard Inflation-Protected Securities (VIPSX). There is a better high-yield fund at Vanguard that I believe you should consider as an alternative. These 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 in this fund.
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 funds managed by a great management team. You can find out the names of my favorite team's funds, plus another Vanguard growth fund that will give you exposure to big U.S. companies with strong balance sheets, when you join The Independent Adviser for Vanguard Investors.
Turn a skeptical eye toward the new Vanguard Managed Payout funds that Vanguard is introducing—Managed Payout Distribution Focus (VPDFX), Managed Payout Growth and Distribution (VPGDX) and Managed Payout Growth Focus (VPGFX). Vanguard isn't telling who's pulling the strings on these actively managed asset allocation funds, and that's just wrong. How are you and I to know whether "the investment committee" that is running these funds has any expertise at all in active asset allocation? Remember, Vanguard's an index shop, and these are not index funds.
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 Vanguard Total Stock Market (VTSMX) or, if you're really conservative, Vanguard Balanced Index (VBINX). If your long-term performance has been solid, stick with your strategy.
Stop and smell the roses. 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. Invest with me, and see how you can handily outperform the market with a lot less risk using the best actively managed and index funds at Vanguard.
So there you have it: 10 easy steps to recoup your losses and make money in the second half of 2008. Follow these simple ten steps, and you will increase your Vanguard profits dramatically. And at the same time, you'll cut your risks, slash your unnecessary investment costs, and get more out of your Vanguard funds.
Sign up today for your own 6-Month RISK-FREE subscription to The Independent Adviser for Vanguard Investors and put my Model Portfolio to work for you! In the June 2008 issue, I'll show you which funds are popular with Vanguard's own Board of Directors! Download the June issue right here!
