The fund employs an indexing investment approach designed to track the performance of the CRSP US Total Market Index, which represents approximately 100% of the investable U.S. stock market and includes large-, mid-, small-, and micro-cap stocks regularly traded on the New York Stock Exchange and Nasdaq. The fund invests by sampling the index, meaning that it holds a broadly diversified collection of securities that, in the aggregate, approximates the full Index in terms of key characteristics. These key characteristics include industry weightings and market capitalization, as well as certain financial measures, such as price/earnings ratio and dividend yield.
- The fund reserves the right to substitute a different index for the index it currently tracks if the current index is discontinued, if the fund’s agreement with the sponsor of its target index is terminated, or for any other reason determined in good faith by the fund’s board of trustees. In any such instance, the substitute index would measure the same market segment as the current index.
- The fund may invest in foreign securities to the extent necessary to carry out its investment strategy of holding all, or substantially all, of the stocks that make up the index it tracks. It is not expected that the fund will invest more than 5% of its assets in foreign securities.
- To track its target index as closely as possible, the fund attempts to remain fully invested in stocks. To help stay fully invested and to reduce transaction costs, the fund may invest, to a limited extent, in derivatives. Generally speaking, a derivative is a financial contract whose value is based on the value of a financial asset (such as a stock, bond, or currency), a physical asset (such as gold), or a market index (such as the S&P 500 Index). The fund will not use derivatives for speculation or for the purpose of leveraging (magnifying) investment returns.
- The fund’s daily cash balance may be invested in one or more Vanguard CMT funds, which are very low-cost money market funds. When investing in a Vanguard CMT fund, the fund bears its proportionate share of the at-cost expenses of the CMT fund in which it invests.
- The fund may temporarily depart from its normal investment policies and strategies when doing so is believed to be in the fund’s best interest, so long as the alternative is consistent with the fund’s investment objective. For instance, the fund may invest beyond the normal limits in derivatives or ETFs that are consistent with the fund’s objective when those instruments are more favorably priced or provide needed liquidity, as might be the case when the fund is transitioning assets from one advisor to another or receives large cash flows that it cannot prudently invest immediately.